How Beginning Edina Homebuyers Can Manage Closing Costs

April 14, 2010 at 1:59 am

The ramifications of owning a house may intimidate first time homebuyers but being knowledgeable about closing costs can be of great help.Some are not aware that closing costs are typically set at 15 percent of the sales price, and most lenders would require for them to be paid upfront. Achieving your goal of efficiently projecting your available funds and discussing your preferences in the arrangement of final price means being more prudent to identify them earlier, even if some lenders can roll them into the loan package.

Remember that the lender’s primary basis in the amount he presented to you is the sales price paid by the buyer and not necessarily the net price (or the sales price minus the closing costs). There are various ways in which closing costs are allocated and this may need the help of your realtor and lender if only to come up with the most agreeable plan for you to stay within your budget limit.

Having knowledge about the responsibilities of a buyer is the first prerequisite to understanding what closing costs are. The ‘Smart Consumer’s Guide to Home Buying’ book’s author, Barron, explicated how important it is to be aware that contrary to the belief of many, custom prescribes how closing costs are allocated as well as the buyer and seller responsibilities as stated in the contract, and not the law.

All the fees and discount points of the loan are part of the buyer’s responsibilities. The lender adds all these at the end of the contract and may vary differently from one financial institution to another. More often than not, bankers will treat this fee as a part of the contract or may be dispensed depending on the customer, but still you must figure out the exact estimated amount.

The buyer is also responsible in paying the premium of the homeowner’s title insurance policy and has to ensure that this be settled before the purchasing begins. Most will agree that it is beneficial to have some extra cash in your hands to pay for the premium and to avoid getting it rolled into the loan. Note also how premium cost may vary from one insurance company to another. Make some research on the homeowners insurance policy rates or look around for more options before you decide to sign the contract right away. These costs constitute the seller’s obligations.

Sales Commissions – refers to the fees allocated to the agent of both the buyer and the seller. But these may be dependent upon the agent you are working with.

Inspection Costs – refers to the expenses related to the home’s inspection and all other forms of inspection that may be required before the buying and selling commence.

Title Insurance – there is one misconception about title insurance since many first time homebuyers think that they will need to take care of any costs associated with the title company except it. However, title insurance costs are included in the closing cost and thus becomes the seller’s responsibility.

When you know what closing costs are, you can have a better idea as to what your home’s final price will be during the signing. As a matter of fact, if early on the financing process you have done so, the lender may give you necessary information like the fees you will have to pay and discount points among others.

Alexandria P. Anderson is a licensed Minnesota Realtor that uses the Edina real estate search to help her clients to find and purchase Edina Homes and other Twin Cities properties.

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