Most first-time home buyers are unfamiliar with real estate jargon. A wide array of terms can be heard in the vocabulary of the many people involved in a real estate transaction, from your loan officer to your real estate agent. One of those terms is “closing costs”. Continue reading to learn what exactly closing costs are and how much they will cost you.
Closing costs are basically all fees involved in processing the purchase of your home. These fees are paid to your lender when you close on your home. The specific amount you will pay will depend on the type of loan you have and the location of your home. In Wisconsin, home buyers can expect to pay, on average, $3459 in closing costs, according to a CoreLogic report. The closing cost percentage can vary between 2%-6% of the total purchase price of your home. Here are some of the most common closing cost fees:
- Loan Application Fee
- Loan Origination Fee
- Real Estate Attorney Fees
- Realtor Commissions
- Courier Fee
- Credit Report Fee
- Title Search Fee
- Title Insurance Fee
- Discount Points Paid
- Escrow Funds
- Transfer Tax
- Recording Fee
- Flood Certification
- Homeowners Insurance
- Prepaid Interest Charges
- Private Mortgage Insurance
- Property Taxes
- Rate Lock Fee
How to Reduce Closing Costs When Buying a Home
In Wisconsin, buyers cover most of the closing costs; however, buyers can negotiate with sellers for concessions to help cover the expense of closing costs. There is a limit to the concession amount home sellers can provide and that amount varies depending on the type of loan (Conventional, FHA, USDA, VA). You will need to discuss this with your Buyer’s Representative.
If you have the opportunity, you can shop around for financing to help reduce your closing costs. Closing cost fees are not set in stone and you have the freedom to choose the mortgage company that you want to work with. When contacting lenders, ask about the closing fees that they charge.
If you qualify, there are grants available to assist buyers with closing costs when financing through a government loan. You will need to take the time to research closing cost assistance programs, who offers the programs, and the criteria for eligibility.
The last way to reduce closing costs is to ask your lender to incorporate your closing costs into the loan. This sometimes involves a higher interest rate, and you will definitely incur a higher loan balance and monthly payment. Remember, you’ll be paying more in interest over time when going this route.
It is best to not only save enough for the down payment of your new home, but also for the expected closing cost amount you will incur. When competing with other buyers for a home, asking for sellers to pay closing costs on your behalf does not make for an appealing offer. On the same hand, lenders will see a red flag if you must ask them to cover closing costs for you. It is possible to have closing costs covered by sellers and financial institutions, but it is best if you come to the table with closing costs in hand. Speak with your lender and your real estate agent about your specific situation.
Closing Costs FAQs
When it comes to closing costs, it is best to ask your real estate agent questions about local property taxes and any fees required by the State of Wisconsin. It takes about 30-60 days to close on a new home and you’ll need to pay your closing costs when you attend the closing of your home. This is the day that you sign all the paperwork and acquire the keys to your new home. A good real estate agent will answer all your questions and make the closing transaction as smooth as possible for you.
If you need assistance purchasing a home, contact one of our Klapperich Real Estate Agents today. You can also visit the Finance Tools section of our website to help you calculate many fees and figures involved in home buying. We wish you all the best in your new home purchase.
