What are Closing Costs on a House?

What are Closing Costs on a House?

When you buy a home, you should be prepared to pay closing costs. Put simply, closing costs are fees you pay on closing day to finalize the transaction. These fees may cover title insurance, government processing fees, upfront tax payments, homeowners insurance, and lender expenses.

You’ll need to budget for closing costs in addition to a down payment and pay them through a cashier’s check or wire transfer. Let’s take a closer look at what closing costs are and how they work.

How Can I Lower My Closing Costs?

Fortunately, closing costs are not set in stone. There are strategies you can take to reduce what you pay at closing including:

• Shop Around: Not all mortgage lenders are created equal. That’s why it’s in your best interest to do your research and compare the closing costs and other fees of several lenders. Ideally, you’d opt for a lender who offers competitive interest rates and lower closing costs.
• Ask the Seller to Contribute: If you’re buying a home in a buyer’s market where there are plenty of homes for sale, you may want to ask the seller to pay for some of or even all of your closing costs. As long as you’re ready to close and don’t make excessive demands, the seller may help you out.
• Look Into Rebates and Incentives: Some banks and other lenders offer rebates or incentives to first-time homebuyers or other eligible borrowers. These may include low or discounted closing costs.

Who Pays Closing Costs: the Buyer or Seller?

While both buyers and sellers are on the hook for closing costs, the buyer is typically responsible for most of them. The closing costs you pay as a buyer will be based on a few factors like where you live, the type of loan you take out, and the specific lender you choose. As we mentioned above, you can negotiate with the seller to help cover some of the closing costs and lower the amount you have to pay.

How Much are Closing Costs in Washington State?

Generally speaking, closing costs account for 3% to 6% of the total loan amount. If your mortgage is worth $300,000, for example, your closing costs will likely fall in the $9,000 to $18,000 range. In the state of Washington, closing costs run $11,513.23 on average, including taxes and $4,205.82 on average, excluding taxes.

Can I Refinance My Mortgage with No Closing Costs?

With a no-closing-cost refinance, you won’t have to pay any upfront closing costs when you refinance your mortgage. But keep in mind that a no-closing-cost refinance won’t get rid of these expenses. It will simply move them into your principal or exchange them for a higher interest rate. Before you commit to a no-closing cost refinance, do the math and make sure it makes financial sense.

Closing Thoughts

Closing costs are processing fees you pay when you close on your home. For more information about what they are and how you can reduce or even eliminate them altogether, don’t hesitate to fill out my convenient online form and get in touch.