Saving for a down payment is a key step in the homebuying process, and it’s not the only piece you need to include in your budget. Another factor that’s important to plan for are the closing costs required to obtain a mortgage.

What Are Closing Costs?

Closing costs are lender and third-party fees paid at the closing of a real estate transaction, and they can be paid out of your pocket or by the seller. They typically range from 2% to 3% of the purchase price of a home. (Example: For those who buy a $250,000 home – 3% = $7,500 or $350,000 2% = $7,000).

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

So How Can You See the Closing Costs Before Closing?

When you are in contract to purchase a home, you will receive 40+ pages of State and Federal disclosures to sign electronically in the first week. The Loan Estimate a form that is part of the disclosures. It is approximately 5 pages provides you with all the details of the loan and fees (Closing Costs) for the transaction. This is a great opportunity for you to ask questions and learn more about the process.

When you get a week or less from closing you will receive another document called a Closing Disclosure. This is required by law and what we call a “know before you owe” disclosure. It once again lays out all the costs and any funds you will need to bring into closing. There is a three day waiting period before you can sign the legal loan documents that allows you time to ask questions or make changes.

Trulia gives you some great advice, saying,

“There will be lots of paperwork in front of you on closing day, and not enough time to read them all. Work closely with your real estate agent, lender, and attorney, if you have one, to get all the documents you need ahead of time.

The most important thing to read is the closing disclosure, which shows your loan terms, final closing costs, and any outstanding fees. You’ll get this form about three days before closing since, once you (the borrower) sign it, there’s a three-day waiting period before you can sign the mortgage loan docs. If you have any questions about the numbers or what any of the mortgage terms mean, this is the time to ask—your real estate agent is a great resource for getting you all the answers you need.”

Bottom Line

Let’s get together to discuss the homebuying process, to be sure your budget what you need to purchase your dream home – without any surprises! That is why education and our classes are vital to taking the “unknown” out of purchasing your first home!