Closing Costs - Have You Set Enough Money Aside?

Dated: December 13 2020

Views: 3

There are many potential homebuyers, and even sellers, who believe that you need at least a 20% down payment in order to buy a home, or move on to their next home. Time after time, we have dispelled this myth by showing that there are many loan programs that allow you to put down as little as 3% (or 0% with a VA loan)

There are many potential homebuyers, and even sellers, who believe that you need at least a 20% down payment in order to buy a home or move on to their next home. Time after time, we have dispelled this myth by showing that there are many loan programs that allow you to put down as little as 3% (or 0% with a VA loan).

If you have saved up your down payment and are ready to start your home search, one other piece of the puzzle is to make sure that you have saved enough for your closing costs.

Freddie Mac defines closing costs as:

“Closing costs, also called settlement fees, will need to be paid when you obtain a mortgage. These are fees charged by people representing your purchase, including your lender, real estate agent, and other third parties involved in the transaction. Closing costs are typically between 2 and 5% of your purchase price.”

We’ve recently heard from many first-time homebuyers that they wished that someone had let them know that closing costs could be so high. If you think about it, with a low down payment program, your closing costs could equal the amount that you saved for your down payment.

Here is a list of just some of the fees/costs that may be included in your closing costs, depending on where the home you wish to purchase is located:

  • Government recording costs
  • Appraisal fees
  • Credit report fees
  • Lender origination fees
  • Title services (insurance, search fees)
  • Tax service fees
  • Survey fees
  • Attorney fees
  • Underwriting fees

Is there any way to avoid paying closing costs? 

Work with your lender and real estate agent to see if there are any ways to decrease or defer your closing costs. There are no-closing mortgages available, but they end up costing you more in the end with a higher interest rate, or by wrapping the closing costs into the total cost of the mortgage (meaning you’ll end up paying interest on your closing costs).

Homebuyers can also negotiate with the seller over who pays these fees. Sometimes the seller will agree to assume the buyer’s closing fees in order to get the deal finalized.

Blog author image

Carmen Johnson

Co Owner of the Red Door Team Carmen has been born and raised in Snohomish. Is married, owns a home in downtown, has a Goldendoodle and is expecting her first child in April! Loves spending time with....

Latest Blog Posts

Is Home Price Appreciation Accelerating Again?

At the beginning of the year, industry forecasts called for home price appreciation to slow to about half of the double-digit increase we saw last year. The thinking was that inventory would

Read More

4 Tips to Maximize the Sale of Your House

Homeowners ready to make a move are definitely in a great position to sell today. Housing inventory is incredibly low, driving up buyer competition. This gives homeowners leverage to sell

Read More

93% of Americans Believe a Home Is a Better Investment Than Stocks

A recent Survey of Consumer Finances study released by the Federal Reserve reveals the net worth of homeowners is forty times greater than that of renters. If you’re

Read More

7 Most Overlooked Spots During Bathroom Cleaning

A good bathroom cleaning routine should be more than a hard-surface wipe-down. Make your space a sanctuary of cleanliness by adopting a more rigorous process for disinfecting and cleaning. A little

Read More