News
October 7, 2018

Savvy buyers armor themselves with closing costs knowledge

By AAON TAYLOR

When Millennials reached the prime age to become first-time home buyers a majority of them said they had no idea that they had to pay a bundle of closing fees in additon to the cost of buying the property.


Aaron Taylor
2018 NETAR President

Things haven't changed much since then – at least not about closing costs. And Millennials are not the only buyers who underestimate what they will owe at closing. Even second or third time buyers should do a refresher to see what has changed since their last real estate transaction.

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 a little over $2,000 in closing costs.  That 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.

Closing costs vary widely but here are some of the items that show up.

-    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 check list 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 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 actually be zero. Discount points can be tax-deductible, but they can’t be refunded once paid.

-    Opt for low or zero-closing cost 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 a specific borrower 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.  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.

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