Like home prices, closing costs have also gone up
Competition for the right house, at the right price, at the best possible mortgage rate too often pushes planning for what happens at closing to the background. And it typically causes some shock because, like the price of homes, the average closing cost for a single-family home saw a double-digit increase last year, according to CoreLogic.
The average cost (with taxes) in Tennessee is $3,911. That’s not the highest in the nation, but it is not the lowest.
According to Bankrate.com, depending on the home price and a couple of other factors, buyers can expect to pay about 2% to 5% of the loan principal in closing costs. Here are some of the items that show up in a full closing cost picture.
– Credit report fee.
– Loan origination fee.
– Attorney’s fees.
– Charge for inspections.
– Discount points.
– Appraisal fee.
– Survey fee.
– Title insurance.
– Title search fees.
– Escrow deposit.
– Pest inspection fee.
– Recording feed.
– Underwriting fee.
There’s no way to get around closing costs. However, there are things buyers can do to reign in those costs. Mortgage Reports, a publisher of personal finance news and advice, offers some tips that all homebuyers should add to their checklist before they head to the closing table.
Here is a sample of the tips:
– Don’t overpay on discount points. These one-time, upfront fees get buyers a lower mortgage rate. For those who plan to keep the mortgage for more than seven years, it can mean paying a little more upfront in exchange for long-term savings. However, “discount points have the secondary effect of lowering a loan’s APR. Because of this, lenders will often use discount points as a way to make rate quotes look more attractive. Lenders know consumers shop by APR even though they shouldn’t. One way to reduce closing costs is to pay the proper number of points for your particular situation, which may be zero.
Discount points can be tax-deductible, but they can’t be refunded once paid.
– Opt for low or zero-closing costs when appropriate. This option is actually a loan that doesn’t reduce the total costs paid – it reduces the cost paid by the borrower. Closing costs are paid by the lender for a higher mortgage interest rate on the loan. This option is a “good way to step down your mortgage rate while the market gradually improves.
– Choose the proper loan type for your needs. Mortgage products vary from conventional to FHA, VA, USDA, or jumbo loans, and more. Each can meet specific borrower needs. But each loan comes with its own set of closing costs. It takes some homework but selecting the right product can be a money saver.
– Choose a realistic rate lock. They are typically available in 15 to 60-day increments and 15 or 30-day increments thereafter. Lenders charge more for longer locks. Closing costs can be lowered with a “realistic and appropriate rate lock.
For other issues and answers, search for “closing costs” and check the articles and advice columns on the National Association of REALTORS’® HouseLogic Website at https://www.houselogic.com.
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