Prepare for Closing Costs
A good faith estimate (GFE) is provided to you by your lender as an estimate of the closing costs that you will incur when you officially buy a house.
Laws today require that the GFE actually be more than just a guess – it is an educated estimate by your lender that is required to be very close to (within a certain small range of) what your closing cost will actually be. Your realtor will also often provide you with an estimated closing statement that will include closing cost estimates. At least 75% of contracts today actually move closing costs from buyer to seller; however, buyers should still be aware of their estimated closing costs and how much to prepare for. As a benchmark, a $150,000 home will have between $4000 and $5000 in closing costs.
Here is a list of what the “closing costs” actually entail:
- Lender fees to cover the cost of processing your home loan, the points or percentage of the loan you owe at closing time, the appraisal of your new home, the cost of running a credit report, and interest payments.
- Escrow fees are special funds held in an account to cover expenses like insurance and property taxes.
- Title fees cover the cost of a title search to determine if anybody else has a claim to the house and the cost of providing title insurance for coverage in case any title disputes occur.
- Underwriting fees cover the cost of the analytical process that’s done when you apply for a home loan.
- Third party fees include things like the cost of preparing the documents for your closing.