Have You Set Aside Enough Cash For Closing Costs

Dated: 10/06/2016

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There are many potential home buyers, 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 or USDA 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.”



As we enter the fourth quarter of 2016, the Dallas-Fort Worth housing market is still very active. Home buyers are looking to capitalize on the still-low interest rates and many first-time home buyers are trying to prepare for high closing costs. 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).


Home buyers 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, although this is less common in the current sellers' market.


Bottom Line


Speak with your lender and agent early, and often, to determine how much you’ll be responsible for at closing. To find out you’ll need to come up with thousands of dollars right before closing is not a surprise anyone is ever looking forward to. The Lisa Birdsong Group takes pride in guiding our clients to a successful closing, and this includes preparing them for each step of the purchasing process. Please let us know if we can help. 

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Lisa Birdsong

Top 1% of Texas Real Estate Teams; McSam Realtor of the Year, 2016; Certified Residential Specialist, CRS D Best Realtor, 2016, 2017 Castle Hills Realtor Advisory Board, 2016; Windsong Ranch Real....

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