We are in a buyer's market. Nine out of ten transactions in our area will include the seller paying toward the buyer's closing costs. As a first-time home buyer, you may not understand how much closing costs run, or what they include.
To begin, closing costs are typically 3% of the total sales price. This does not include any down payment required by the lender. If you are purchasing a home for $200,000, you can expect your closing costs to be approximately $6,000.
Closing costs include attorney fees, title examination, recording the deed, title insurance, mortage interest for the current month, taxes, home owners insurance and possibly loan discount points.
The loan program you are using will determine the maximum amount the seller can contribute to your closing costs. For instance, VA (Veterans Administration) loans will allow a maximum of 4% of the sales price in closing cost assistance. FHA loans will allow a maximum amount of 6% of the sales price. Conventional loans, with specified down payments, will also allow 6% of the sales price. Just because you are permitted through your lender to accept these maximum amounts, does not mean the seller will always be willing to contribute the maximum.
If you are being offered closing cost assistance, per the example above, of $6,000 and your closing costs end up being $5,500, if the additional $500 is not put toward other prepaids, the money will not be, in any way, forwarded to buyer in the form of a refund, check or cash. That is why a good lender, and a good Realtor, will look to put that money toward prepaying HOA fees, insurance and so on.
If you are ready to make your home purchase, give me a call and we'll get started with your home search.
Chris Ann Cleland, Realtor, Licensed in Virginia, 703-402-0037, firstname.lastname@example.org