The process of purchasing a new home can be full of surprises, but knowing what to prepare for can keep you from being blindsided by surprise costs and fees, and helps you budget for all the possibilities. 

Many homebuyers think that saving for their down payment is enough to buy the house of their dreams, but what about the closing costs and other fees that are required to obtain a mortgage?

By law, a homebuyer will receive a loan estimate from their lender 3 days after submitting their loan application and they should receive a closing disclosure 3 days before the scheduled closing on their home. The closing disclosure includes final details about the loan and the closing costs.

But what are closing costs anyway?

According to Trulia:

“Closing costs are lender and third-party fees paid at the closing of a real estate transaction, and they can be financed as part of the deal or be paid upfront. They range from 2% to 5% of the purchase price of a home. (For those who buy a $150,000 home, for example, that would amount to between $3,000 and $7,500 in closing fees.)”

Keep in mind that if you are in the market for a home above this price range, your costs could be significantly greater. As mentioned before, closing costs are typically between 2% and 5% of your purchase price.

Trulia continues to give great advice, saying that:

“…understanding and educating yourself about these costs before settlement day arrives might help you avoid any headaches at the end of the deal.”

What goes into the final total of your closing costs for your home purchase will depend on the home, and no two sales will be the same. The types of charges that go into your total closing costs are dependent on where in the country you live and what kind of property you purchase. Closing costs could include, but are not limited to, appraisal fees, home inspection fees or charges, credit report processing and title search fees. Ask for a breakdown of your closing costs so you know exactly what it is you’re paying for.

If you’d like to avoid paying upfront closing costs, you can talk to your lender and real estate agent about a “no-closing cost” or “zero closing cost” mortgage. For these types of mortgages, the lender will front the initial closing costs and fees, but will charge a higher monthly interest rate of the course of your home loan, meaning you’ll pay a larger monthly payment.

Speak with your lender and agent early and often to determine how much you’ll be responsible for at closing, or how much your monthly payment will be if you choose a “no-closing cost” or “zero closing cost” mortgage. Finding out that you’ll need to come up with thousands of dollars right before closing is not a surprise anyone is ever looking forward to!

If you’re looking for a Corpus Christi home and want to learn more about potential closing costs, check out the Place of Houses relators.