What are the typical costs to close the deal?

Since many of the costs associated with closing on a home are based on purchase price, and or loan amount, it isn’t feasible to give you specific figures. However, our goal is for you to understand the individual parts, that together, will comprise typical closing expenses.

  

Down Payment - There are several 100% financing programs available, but typically the minimum down would be between 3.5% and 20% of the contracted price. However, you can put down as much as you’re able to afford.  This figure is easy to arrive at once you know what percentage of the contracted price you are going to put down.  

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Pre-paid items or Impounds - These items are part of the total closing costs, but are broken down separately which often causes confusion when total costs are presented to the Buyer.  These are computed by a formula and their purpose is to fund your escrow account. An escrow account functions just like a savings account.  Each month, a given amount is collected by the lender as part of your payment and then saved until it is used to pay your property taxes and insurance at their annual renewal. The lender pays these costs directly to the vendor from your escrow account balance.  

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Closing Costs - Arriving at this figure is much more complicated because of the number of items that comprise it.  However, the good news is your lender will provide you with a good faith estimate (GFE), which will detail the anticipated amount for each item that makes up the total closing costs.  In addition, it will also show the total cash you need to close. The GFE will include your down payment, impounds, and closing costs, as well as credits for your earnest money and any closing costs paid for you by the Seller.  

 

We hope this has given you a basic understanding of how all three of these parts play a role in coming to your total closing costs.  The more you understand, the more comfortable you will be when you get the GFE from your lender.