Getting ready to purchase a home is a huge financial undertaking. While you are probably aware of having to save up for a down payment, you might not know about closing cost fees. Don’t be taken by surprise at the closing table; here’s what you need to know about closing costs.

What are closing costs?

Closing costs are the fees charged for services performed during the home purchasing process that you will pay at closing. Closing is the final step of the loan process and is a meeting between you (the buyer), the seller, and closing officer (a lawyer or title/escrow company representative, depending on the state). You will review the legal documents provided in your loan package and execute all required documents. This step is extremely important, as it is the final confirmation of the loan terms as discussed with your lender.

What fees are included in closing costs?

The closing costs you might have to pay will vary based on the property, where you live, and the loan you choose. The following are a few of the most common fees you may see.

Again, closing costs will not be the same for everyone as they vary by region. On average, most homebuyers typically pay about 2 to 5 percent of the home purchase price. For example, if the home costs $250,000, you might pay between $5,000 and $12,500 in closing fees.

Can I avoid closing costs?

It is likely you might be able to avoid some closing cost, but not all. Here a few ways to save on closing costs.

Your lender will provide you with an estimate of what closing costs will be at the beginning of your application process, which will allow you the chance to shop around to find the best lender and deal for you. After finding a lender and going through the loan process, you will receive a closing disclosure, or the final closing cost total, at least 3 business days prior to closing. This is your time to make sure everything looks right and if you have questions or find a mistake, you have time to contact your lender. If you’re worried about how much you’ll pay in closing costs, there’s plenty of options for you! NFM participates in most state bond programs that provide closing cost assistance.

To learn more about closing costs or bond programs, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!

Recently, we discussed the fifth step in the home buying process: Processing and Underwriting. Once the clear-to-close (CTC) is issued, your loan moves into the sixth step: Closing. This is the final step in the process before you move into your new home.

What Happens at Closing

At closing, all the necessary paperwork is presented and signed by both the sellers and the buyers. At least three business days prior to closing, you will receive a Closing Disclosure (CD). The CD will detail all of your closing costs and factor in any down payments, credits or gift funds provided on the loan transaction.

When you close on your loan, the title of the property is transferred to the buyer, an escrow account is set up if applicable, funds are obtained by the buyer, and the security interest of the lender is recorded by the County or City Clerk. Should you need funds for closing, these must be in the form of a certified check.

After Your Loan Closes

You will make payments on your mortgage loan following an amortization schedule. An amortization schedule will show you the amount of principal versus interest you are paying each time you make a payment.

Once your loan has closed, your lender may transfer servicing of your loan to another lender or servicing company. You will be contacted both by your current lender and your new lender/servicer in the event that servicing is transferred. If you have any questions after your loan closes, you can reach out to your Loan Originator, or to your current loan servicer.

If you missed any of our 6 Step blogs, you can find them here:

Homeownership is a rewarding achievement. The home buying process may present challenges, but having qualified mortgage professionals by your side can make all the difference. If you have any questions about the home buying process, contact one of our licensed Mortgage Loan Originators. If you are ready to buy a home, click here to get started!