Closing Costs - Have You Set Enough Money Aside?

Dated: December 13 2020

Views: 6

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

Waiting for a Lower Mortgage Rate Will Cost You More

Today’s housing market is truly one for the record books. Over the past year, we’ve seen the lowest mortgage rates in history. And while those rates seemed to bottom out in

Read More

Should You Sell Your House or Rent It Out?

Sometimes, you can only live on your property for so long until something comes up and you have to relocate. Maybe that’s by choice, or work is forcing you to do so. Maybe you like the idea of

Read More

NWMLS Market Report September 2021

‚ú®The latest market update from NWMLS is out and has discussed that "September's housing market remained "very active" to "frenzied" around Washington state with brokers reporting year-over-year

Read More

Flipping Face-Off: Is It Really Better Than Renting Out Properties?

A wonderful thing about real estate investing is that there are so many different ways to make money, whether it be with commercial or residential properties.Of course, investors have their

Read More