News
September 29, 2019

Don’t be surprised by with your closing costs tab

By KAREN RANDOLPH


KAREN RANDOLPH
2019 NETAR President

Closing costs are an all-too-common surprise for homebuyers. Their focus was on getting a good deal, planning for the down payment and a myriad of other things that come with real estate transactions. Getting a grip on closing costs is and should have a place in the planning to ward off closing costs sticker shock.

Depending on the price of the home and a couple of other factors, those who buy in the Northeast Tennessee part of the Tri-Cities region can expect to pay about $2,030 in origination costs and third-party fees.  This number is less than the national average, but not by much. Bankrate.com’s most current annual survey shows the average closing costs in Tennessee is $1,054 in origination fees and $976 in third-party fees. The national average is $951 in origination fees and $1,133 in third-party fees.

But, Bankrate’s calculations exclude several key closing cost variables, such as transfer taxes, miscellaneous state fees, escrow fees, and home inspection fees. The real cost of closing is higher than $2,030. For a more accurate estimate of closing costs, experts recommend buyers save between two-to-five percent of the home’s value to put towards closing. The Tri-Cities median sales price for a single-family home in August was $165,000.  With this purchase price, a buyer should expect to pay between $3,340 to $8,300 in closing costs.

Here are some of the items that show up in the 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 is 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 Mortgage Report’s 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 effect, lenders will often use discount points as a way to make rate quotes look more attractive. Lenders know consumers shop by APR even though it is not the best practice. One way to reduce closing costs is to pay the proper number of points for your particular situation, which may actually be zero. Discount points can be tax-deductible, but they cannot be refunded once paid.

-    Opt for low or zero-closing cost when appropriate. This option is actually a loan that does not reduce the total costs paid – it reduces the cost paid by the borrower. Closing costs are paid by the lender by adding them to your loan amount and charging a higher mortgage interest rate on the loan.

-    Chose the proper loan type for your needs. Mortgage products vary from conventional to FHA, VA, USDA or jumbo loans, and more. Each loan type can meet a specific borrower’s need, 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.  Rate locks are typically available in 15 to 60-day increments and 15 or 30-day increments thereafter. Lenders typically charge more for longer locks. Closing costs can be lowered with a “realistic and appropriate rate lock.

Realtor.com also has an excellent closing cost primer and suggestions on how to lower the costs at https://www.realtor.com/advice/buy/reduce-closing-costs/

NETAR is the voice for real estate in Northeast Tennessee. It’s the largest trade association in Northeast Tennessee, Southwest Virginia region representing over 1,200 members and 100 affiliates involved in all aspects of the residential and commercial real estate industries. Pending sales, monthly Trends Reports, and the regional market analytics can be found on the NETAR websites at https://netar.us/voice-real-estate-northeast-tennessee .

 

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