What is Closing Cost When Purchasing a Home?

What is Closing Cost When Purchasing a Home?
05/17/2022

What is Closing Cost When Purchasing a Home?

In this paragraph, I’m going to explain closing cost and the total costs incurred at the closing of a real estate transaction. Firstly, closing cost may include real estate agent’s fee, mortgage broker fee, mortgage interest rate and points, real estate attorney’s fee, escrow services fee, recording fees and other closing agent-related fees. Secondly, real estate closing costs are paid by the buyer to the seller at closing of a property sale. However, these charges typically vary based on location and type of transaction. Moreover, It is worth noting that there are no standard closing costs; each closing will be unique in terms of its charges. In addition, let’s take a look at some of the common closing costs you can expect when buying a home. Most importantly, what is closing cost when purchasing a home?

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Real Estate Agent’s Fee

An agent’s fee may vary depending on the real estate company you choose to work with. Typically, these charges range between 1% and 3%. This may be a flat rate of $1,000 or an agent may charge a percentage of the purchase price.

Mortgage Broker’s Fee

A mortgage broker’s fee is usually added to the loan amount. This fee will be shown as part of the loan rate or as a separate fee. Mortgage brokers are often hired to increase the appeal of the loan to a bank, or other lending institution.

Mortgage Interest Rate

This is the interest rate paid by the borrower (you) and collected by the lender (the bank). The mortgage rate will be listed as a percentage or as a range. You can expect a rate around 4 to 5 % for a typical residential loan. For instance, this is the rate you will have to agree to when applying for a loan.

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Real Estate Attorney’s Fee

The attorney’s fee is the cost paid to an attorney to handle the transaction. These costs will vary based on the attorney, location and the amount of the transaction.

Escrow Services Fees

Each loan has an escrow account. In other words the escrow account is used to pay the mortgage, taxes and insurance. In some cases, the real estate agent may collect a portion of this fee.

Recording and Transfer Taxes

These are taxes levied by the government to record a deed and transfer ownership of property. Those fees are not paid by the buyer and is included in the selling price.

Other Closing Costs

Other closing costs may be involved in other circumstances. If the seller is present at the closing, or the mortgage does not close at the bank.

Summing up

The closing cost depends on the location, type of transaction and real estate company used. Between 3% and 6% of the total real estate closing costs are common. In addition, to real estate agent fee, mortgage broker fee, mortgage interest rate, real estate attorney’s fee, escrow services, recording and transferring costs, closing costs are also included.

Conclusion

In other words, when purchasing a home you must know the closing costs that are associated with the transaction. You must know, what you’re getting into before agreeing to a purchase. By understanding how closing cost are calculated, you can better prepare for the purchase.

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