Everyone’s path to homeownership is different. Some people buy their first home in their twenties. Others wait until they have a family. And others buy once they settle down in their career and preferred city. There is no “right” time to buy because all of our life’s journeys look different. There are, however, great opportunities to buy for those that are ready to jump on them.
So, while our path to homeownership is different, once we make the decision, the process looks pretty similar across the board. For most homebuyers, there is the home shopping period, the waiting period, the paperwork period, and the closing table. There are so many things being thrown at people as they navigate the home purchasing process that the closing table is not often talked about as much.
Here’s what you need to know about closing costs, how to prepare, and what to be ready for.
What are Closing Costs?
As the name suggests, the closing costs close out the process. It is the moment where all parties get paid—lenders, real estate agents, etc—and you walk away with the keys. It is the exchange and “settlement” of documents. During this process, there are several players who play a key role including the seller, seller’s real estate agent, buyer’s agent, buyer, lender/bank, and the settlement agent.
What Do I Need to Do to Prepare?
The current law says that lenders must provide buyers with a closing disclosure. These documents need to be given to the buyer at least three days before the closing date so that you can look over the terms of your loan and the number of closing costs.
How Much Will I Pay for Closing Costs?
Closing costs can vary, but typically the closing costs will be around 3%-6% of the purchase price. In 2018, the median price of a home in El Paso—as reported by the El Paso Times—was about $151,500. A homebuyer can expect to see closing costs between $6,000 to $9,000.
What Makes Up Closing Costs?
The closing total is an amalgamation of several fees and costs added together. Some of the typical fees to expect during a closing include:
- Application fee: This fee refers to the administrative costs associated with processing the loan application.
- Discount points: These are optional upfront charges that might save you money on interest in the long-term. Ask your mortgage lender about this.
- Origination fee: This charge refers to other parties associated with the lending process.
- Credit checks: This may or may not apply. Some lenders have a separate fee for the required credit check.
- Title fees: The title search is an important part of the buying process. It serves to ensure who has a legal claim to the property you are buying. A title insurance company helps to protect if any claims arise after the closing.
- Appraisal: The appraisal is one of the last steps before closing and it provides an unbiased opinion of your property value. This step is necessary as a way to protect the buyer and make sure you are not being wildly overcharged for a property. A typical appraisal fee can be anywhere from $200 to $400, although this can vary by state and area.
What Kinds of Documents Will I Be Signing?
The excitement of home-buying can often distract people from paying attention to key details on their mortgage and loan agreements. Don’t be afraid to ask questions. Your loan officer is there to help you through the process and your questions and doubts should be answered before you get to the closing table. This ensures the closing day is not full of new questions or information and that you feel confident about what you’re signing. Rocky Mountain Mortgage Company is with you every step of the way.
Here’s a general list of the types of documents you will see at a closing table.
- The mortgage and monthly payment letter. This breaks up the payments you are to make on a monthly basis.
- A statement that details the loan called a “truth in lending” statement
- The promissory note outlines the terms of your loan and states that you are promising to pay back the amount.
- The closing disclosure.
- The document that transfers ownership of the property, which is called the title or warranty deed.
- Statement of identity to verify and re-verify that the title company knows who you are and no one with a similar name will be confused.
The good news is there are also plenty of assistance programs to help first-time homebuyers and other home purchasers with closing costs.
Work With a Trusted Lender and Have Someone Guiding You Through the Process
One of the great things about helping families and first-time homebuyers is being part of a very exciting and transitional time in a person’s life. We know that this moment means a lot to you and the last thing we want is to have you sweating through it or scrambling for answers. We’re here to help you through the process and make you feel comfortable about what you are signing. Closing costs are part of the process, but we make it easy to understand and transparent.
Looking to buy a home? Find a lender that will work with you every step of the way. Call Rocky Mountain Mortgage today and find out more.