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Choosing The Right Home Loan

Buyers often ask me how much are their closing costs. Typical buyer side closing costs range from 2%-3% of the purchase price as a rough rule of thumb. The biggest buyer side closing costs is the loan, so if the purchase is all cash your closing costs may be as little as 1%.

Buyers ask if they need to pay for the buyer’s agent real estate commission. The answer is no you don’t, all real estate commissions are paid for by the seller. This is great for you as a buyer because it lowers the amount of cash you need to buy a property, but keep in mind you will have to pay both commissions when you sell. I say that it averages out to half a commission each transaction, but it is loaded on the backend.

With some deals, if you are running short on cash, and it’s a slow market, you may be able to work out a deal with the seller to help pay for your closing costs.

At closing, Escrow prepares a HUD-1 closing statement, which is all the actual closing costs. It is a good idea to review the HUD-1 to make sure everything is correct.

Here is the breakdown of the different buyer side closing costs:

 Due immediately once in escrow:

Earnest Money Deposit (3% of purchase price) Refundable.

Appraisal (~$450)

Inspections (~$1,000)

Due at the time of closing:

Loan Origination Cost (~$3,000)

Loan Point (1 point loan = 1% of loan amount, no point loans have no points)

Buyer side escrow fee ($250 base + $1.75 per $1,000 of purchase price)

Lender title Insurance  ($1,500-$2,500)

Prepaid Interest, Impounds for Property tax, and reserves, if required by lender for the loan.

Proration on Property tax/ HOA Dues

Home owners insurance


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