When it comes to purchasing a home, there’s more to budget for than just the down payment and monthly mortgage payments.
Closing costs are an essential part of the home-buying process, yet many buyers are either unaware or ill-prepared for them.
In this article, we’ll aim to demystify the process and break down what you can expect in terms of closing costs. We’ll also share some industry tips on how to minimize these costs, which can save you thousands of dollars in the long run.
What are closing costs?
Closing costs are the fees and expenses you pay to finalize the purchase of your home, over and above the price of the property itself.
These costs can vary widely based on factors such as the property’s location, the type of loan you have, and the lender you choose. Generally, closing costs range from 2%-5% of the home’s purchase price.
This can include a variety of charges, such as loan origination fees, appraisal fees, title searches, title insurance, surveys, taxes, deed recording fees, and credit report charges.
How to Estimate Your Closing Costs
To avoid any surprises, it’s crucial to get an estimate of your closing costs early in the home-buying process.
Your mortgage broker or lender should be able to provide you with a Loan Estimate (LE) form that outlines your expected closing costs. This estimate is typically given to you within three days of submitting your mortgage application, and can give you a good baseline to start budgeting.
Tips for Minimizing Closing Costs
- Compare quotes: Like with any major purchase, you should seek multiple estimates for closing fees. Some charges, like appraisals or title insurance, vary between providers. Savvy shoppers, and the ones that spend more time comparing estimates, can find the best deal.
- Negotiate with the seller: Depending on the housing market, buyers may request that the seller covers part or all of the closing expenses. This occurs more often in a buyer’s market, when sellers eagerly accept offers to facilitate a sale.
- Explore no-closing-cost mortgages: Some lenders provide mortgages without upfront closing costs. They either waive these fees or roll them into the loan principal. While this can save you money initially, be aware that this can increase your debt and cause you to accrue more interest over time.
- Ask your mortgage broker for advice: An experienced mortgage broker is invaluable. Their role is to explain your options, negotiate terms on your behalf, and identify ways to minimize expenses. Their expertise will guide you through the complex closing process.
Navigate Cost-Effective Closing With Northwood Mortgage
Understanding closing costs prevents future surprises and saves you money. Researching, comparing quotes, and seeking professional guidance helps reduce closing fees for a smoother start to homeownership.
At Northwood Mortgage, we prioritize helping you navigate the home-buying journey, including managing closing expenses. Our seasoned mortgage brokers provide personalized advice and solutions tailored to your needs.
Call us at 416-969-8130 or contact us online today to make closing on your dream home easier and more affordable.
