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Navigating Closing Costs During Your Home Sale

By
Real Estate Broker/Owner with Morningside Homes, LLC 720-231-5200 DRE# ER300941

 

Buying or selling a house is an exciting and sometimes confusing experience that includes expenses called "closing costs" that can often catch us by surprise. Closing costs are simply the fees and expenses incurred by buyers and sellers during a real estate transaction's closing or settlement process. 

Typical closing costs can vary depending on what is customary in an area, the mortgage type, property value, and other factors.  The largest expenses can be the real estate commission and the title policy.  Total closing costs for a buyer can characteristically range from 2% - 5%  of the sales price and 4% - 7% for a seller.

The most common buyer's closing costs include loan origination fee, title insurance, attorney fees, appraisal, homeowner's insurance, underwriting, miscellaneous fees associated with a new mortgage, and prepaid interest to the end of the month.

Interest is paid in arrears on mortgages after the borrower has used the money.  The payment due on the first of the month pays the interest for the previous month and is calculated for a full month.  The prepaid interest covers the time from the closing date to the end of that month.  The borrower's first payment will usually not be the first of the month following the closing date but the next one.

Separate from the closing costs, lenders usually itemize the additional fees collected at closing used to pre-pay portions of the property taxes and insurance to establish the escrow account.  Insurance is always purchased annually in advance which would be due at closing.

The seller will owe the taxes from January 1st to the closing date, and it will generally show as a credit to the buyer if they haven't been paid to the taxing authority for the year yet.  Lenders generally like to have two months of funds for the annual insurance and taxes so they can be paid or renewed before it is due.

Some expenses are paid outside of closing like the inspection fees that would be due to the provider at the time they are made.

While both buyers and sellers are responsible for paying certain closing costs, it is possible for a buyer to negotiate for a seller to pay part or all their closing costs.  VA loans restrict the buyer from paying certain fees and they become the responsibility of the seller.  Such fees include attorney fees, agent fees, escrow fees to establish the account, rate lock fees, appraisal fees or inspections ordered by the lender.

The actual expenses will be determined by the lender and special provisions in the sales contract. Your agent can supply you with an estimate of closing costs you typically will be responsible for at the beginning of the transaction and again at the time the sales contract is written.  Buyers will receive an estimate from their lender at the time of application.

Posted by

Buy or Sell with Patty Clark              Denver/Aurora Co. and surrounding areas 

Chris and Patty

Helping Families Move with Care

If you would like to be sent properties on a daily or weekly  basis just call or email me and let me know your wants and needs. A match will be made with a home you love and with monthly payments you can afford. I specialize in first time home buyers and sellers who are ready to downsize or move to a larger home as the family grows

Morningside Homes, LLC
patty@morningsidehomes.com
www.morningsidehomes.com
Cell: 720-231-5200                      
CRS,GRI,WCR,SFR,CNE, MRE

 

Comments(6)

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Richard Weeks
Dallas, TX
REALTOR®, Broker
Great information, thanks for sharing.  I hope you have a great day.
Jan 16, 2024 04:07 AM
Wayne Martin
Wayne M Martin - Oswego, IL
Real Estate Broker - Retired

Good morning Patty. There is more involved than the downpayment for buyers and they should be made aware at the beginning of their search. A good loan officer will disclose associated costs in detail. As foe sellers and agent can provide a detailed net sheet. Great post. Enjoy your day.

Jan 16, 2024 05:14 AM
Michael J. Perry
Fathom Realty - Lancaster, PA
Lancaster, PA Relo Specialist

Can’t wait until we get back to a normal market so we can get Seller Assistance to pay the Buyer’s CC 

Jan 16, 2024 06:01 AM
Roy Kelley
Retired - Gaithersburg, MD

This is good information to share with home buyers and home sellers.

Have a productive January.

Jan 16, 2024 06:13 AM
John Pusa
Glendale, CA

Hello Patty Clark very valuable report for navigating closing costs during a home sale.

Jan 18, 2024 04:22 PM
Patty Clark
Morningside Homes, LLC 720-231-5200 - Denver, CO
Helping Families Move with Care

Thank you. Understanding all the ins and outs of the closing cost is where we come in to explain to the clients and try to make it simple to understand. They need us!

Jan 25, 2024 10:03 AM