Closing cost: Who should be the one to pay (2021)

who should pay closing cost

Depending on the specifications in the agreement, the closing cost is paid for by the buyer. There still may be some additional expenses to the seller. Keep in mind when selling a house, you have fees, taxes, and other services that need to be accountable.

Numerous factors go into closing costs. Expect to pay different closing costs based on your settlement, title, and lender fees. It can also vary due to your state tax laws. It is pretty vital to know who pays the closing cost in the real estate transaction and when payment is required.

How much are the closing cost for seller?

You, the homeowner, are more likely to spend an average of 6% to 10% of the sales price of the home in closing cost. That cost includes any fees. Here is a graph to bring the expenses into perspective.

closing expenses

How to get closing cost waived

No, unfortunately, you can not waive closing costs. You can negotiate the closing costs with the homebuyer. If your home carries significant potential, then you might want to bring that up to the buyer paying all the closing.

There is no way around having to pay taxes and expenses. You may find a way to decrease the amount you pay in closing costs but eliminating fees together is not an option. Usually, the responsibility falls on the buyer.

Depending on the experience of the buyer, he may negotiate a possible reduction or even have the closing cost assumed by the lender.

Can closing costs be included in loan?

Yes, in some cases, the lender will offer to pay the cost of closing or add it to the back of the loan. That is similar to a No Closing Cost Mortgage.

Above all, it is useful for the buyer at closing but not the seller. I would consider this only be a good idea if you plan to have the loan out for a short period. Moreover, You will have an increase in interest rates. 

There is something to keep in mind if you plan to go with the no closing cost mortgage. In short, suggest you look deep into whether it is worth the tribulation to reduce the closing cost.

What is included in closing costs?

Closing Costs included
  • Appraisal survey and fees – are used to help validate the market value of a home.
  • Attorney fees – are a requirement in some states to close using an attorney.
  • Title Search – examination if title to be sure there are no liens and claims before the sale of a home
  • Homeowners insurance – is a requirement of the lender at closing to prepay the first year of the insurance premium.
  • Loan origination fee – is the fee for underwriting and processing the loan.
  •  Private mortgage insurance – know as (PMI), is usually required when you are paying a down payment of less than 20%. 
  • Escrow Fees – payment to the escrow agent that assisted with the close.
  • Property Tax – Taxes vary by location. They usually due within 60 days of buying a home.
  • Title Insurance – The lender will require a loan policy that protects the interest of the lender.
  • Recording fee –  is applied by the local recording office for recording public records.

What is included in the closing cost for buyer?

Importantly, If you are the buyer, you typically encounter expenses, such as the cost of purchase and taking a loan for the home. For the buyer, the closing cost covers the property tax, homeowners insurance, and any other expenses, if applicable, like HOA fees.

Furthermore, any fees can be added to the total mortgage loan and paid through your regular monthly payments.

By law, the lender’s required to list closing costs on every loan estimator for the mortgage applicant. In addition, the lender will provide this to the borrower within a few days of application submission.

Most importantly, you should note that most closing costs vary by lender. Take the time to do some research and compare the charges on loans that may be similar.

Closing cost estimator

In conclusion

To clarify, You should have a clear understanding of who will pay the closing cost. If you are buying a home you can expect to pay the majority of the closing cost. There are ways to get a reduction in closing cost but not necessarily waived.

If you are planning on getting a reduction be sure to research the details that come along with making such a decision. I hope this was a great guide to help you move forth with selling your home with ease.

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