When you’re buying a home, you may have heard of something called “closing costs.” But what are they? How much do they cost? And who is responsible for paying them? In this blog post, we’ll explain the basics of closing costs and discuss who ends up footing the bill in the end.
Closing costs refer to the fees associated with the purchase of a home, such as title insurance and taxes. They can be broken down into two categories: lender fees and third-party fees. Lender fees include things like mortgage application fees, loan origination fees, and points. Third-party fees include items like title insurance and appraisal fees.
In the Greater Baton Rouge area, if you have obtained a loan, you will also see one year of homeowner's insurance plus an aggregate amount to start the escrow account as part of your closing costs. Buyers will also find the title company (attorney) fees charged on their closing statement. While closing costs vary from state to state and even from purchaser to purchaser, it’s not uncommon for a homebuyer to pay thousands of dollars in closing costs at the time of signing their mortgage documents.
When it comes to who pays these closing costs, that depends on several factors, including local real estate customs and how much negotiating power each party has in the transaction.
Generally speaking, there are three main scenarios in which closing costs are paid:
- The buyer pays all or most of them.
- The seller pays all or most of them.
- Both parties split the cost evenly between them.
Finally, closing costs can seem overwhelming at first glance but understanding them is key when it comes time to buy a home. Knowing which party is responsible for paying these expenses will help you budget accordingly and make sure everyone involved gets a fair deal in the end. Take your time when reading over your mortgage paperwork so you don't get surprised by any hidden charges or unexpected expenses down the line!Posted by Kristina Cusick on