Closing Costs
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The home purchasing process can be quite confusing, especially for first-time homebuyers. Therefore, it is vital that you do your homework before you start house hunting.
You should carefully consider your budget and calculate your approximate monthly mortgage payment. This ensures that your new home does not become a financial burden.
Additionally, you should calculate how much money you must bring to the closing table. Along with your down payment amount, you will need to provide funds to cover closing costs. These costs vary depending on several factors, and they can drastically impact your total out-of-pocket expenses.
What are closing costs? Here we break down the various fees that are included in closing costs and discuss how you may be able to reduce your out-of-pocket obligations.
What Are Closing Costs?
Closing costs are fees that are paid at closing in addition to the down payment amount. While closing costs are typically thought of as a buyer’s expense, sellers also incur them. However, the buyer’s closing costs are often covered out of pocket or financed, whereas the seller’s closing costs are deducted from the proceeds of the deal.
Several factors impact total closing costs, including the type of loan you are obtaining and what state you live in. For instance, FHA loans and conventional mortgages involve a few slightly different closing costs.