When a buyer and seller sign a purchase and sale agreement, the seller takes the home off the market and the closing process begins. Closing on a home takes around fifty days to complete, and has certain costs that accompany it. Depending on what negotiations took place at the time of the purchase and sale agreement, the buyer or seller is going to have to cover these expenses.
A wide range of professionals are needed to complete the necessary tasks to close on a home. It is typical for the buyer to pay for the majority of them, while the seller only has to pay for a few.
The total closing costs for a home are listed on the closing disclosure form. This is a universal, five-page document a buyer receives from the lender. It lists the total closing costs for the home on the first page and provides a detailed list of each cost on the following four.
Zillow estimates that buyers can typically expect to spend about 3 percent to 5 percent of the home's value on closing costs. These payments cover expenses for inspections, lawyers, mortgage fees, insurance premiums, title charges and more.
The seller traditionally only pays the commission of the buyer's and seller's agents, pest inspections, and sometimes the loan origination fee, according to Zillow.
How to save
There are various ways buyers can try to save money on closing costs. The same way a person might look for the cheapest mechanic to fix their car, buyers can find inexpensive closing service providers. The Consumer Financial Protection Bureau notes that buyers can shop for mortgage closing services other than the ones listed from the lender on the loan estimate. Buyers can use more economical providers so long as the lender agrees to work with them.
Buyers also don't necessarily have to cover all of the closing costs. Redfin recommends that buyers negotiate with the seller to see if they would be willing to pay for some of the expenses. If the seller agrees, they can choose to pay for certain items, or simply contribute a certain amount of money to the buyer.
Closing costs are a necessary part of the mortgage process. Without the help of service providers, the buyer and seller would be unable to complete their transaction and turn over possession of the home. Have questions about closing costs, the closing processes or homeownership in general? Contact CapWest Mortgage.