When it comes to sealing the deal on your dream home, navigating through closing costs can feel like a financial maze. Imagine saving up $15,000 for the down payment on your new house, only to be blindsided by an additional $8,500 in closing costs! For most first-time home buyers (and even for some experienced buyers) closing costs can be an unwanted surprise. This is where closing cost assistance can be a life-saver.
What is Closing Cost Assistance?
Closing cost assistance is essentially a financial strategy to help homebuyers be able to reach that goal of home ownership. It’s a monetary cushion designed to soften the impact of various closing costs—appraisal fees, attorney fees, title insurance, and the like.
How Does Closing Cost Assistance Work?
If you are thinking of buying a home, you may be wondering how you can reduce your cash to close. There are several important closing cost assistance strategies that can help you pay less out of pocket on closing day.
- Lender Credits: Essentially you can opt for a slightly higher rate than you are approved for to help offset or even cover your closing costs completely.
- Realtor Credit: By working with a preferred buyer’s agent, they can offer a rebate to go towards your closing costs.
- Strong Negotiation: A seller’s contribution or credit can be negotiated by your realtor to help cover or offset your closing costs.
- New Construction Credit: By purchasing in an approved preferred development, you can get up to a $10K builder credit in some cases.
- Gift Funds: a one-time gift for closing costs is allowed on your purchase from a family member.
Coming up with a strategic plan with your lender upfront goes a long way in structuring your financing the right way. All of these options can be used together or individually to reduce your closing costs. Thats why it critical to come up with a cost benefit analysis to weigh all your options with the help of your mortgage advisor at loan approval.
Typical Closing Costs for Buyers
Now, let’s look at the typical costs in the closing cost lineup:
- Rate Buydown & Origination Fees: Rate buydown & origination fees typically run anywhere from 1% to 2.0% of the total loan amount.
- Appraisal Fee: Determining the fair market value of your home comes at a cost, usually falling in the range of $350 to $500.
- Title Search and Insurance Fee: Safeguarding against unforeseen ownership claims, with fees varying from $750 to $1,500.
- Inspection Fees: A cost to uncover potential property issues $350-$450.
- Attorney Fees: closings are conducted by real estate attorneys. The fees can vary but are often between $695 to $1,200.
- Escrow Deposit: A prepaid amount for property taxes and homeowners’ insurance are due at funding into an escrow account. Typically, 12 months of insurance and 2-10 months for property taxes depending on the time of year you close.
This is the exact reason why closing cost assistance exists. Closing cost assistance is a financial lifeline and can be a game-changer when it comes to being able to get that new home. So, what’s the deal with closing cost assistance, and how can you use it to assure you can get the deal done?
Can You Benefit from Closing Cost Assistance?
Closing costs typically represent 2% to 5% of the loan balance, a significant financial commitment that can catch many buyers off guard, especially those entering the real estate arena for the first time or operating within a more modest budget.
However, the beauty lies in the solution: closing cost assistance. It can be your financial ally, potentially turning the tide when finding that extra cash feels like searching for a needle in a haystack. So, if closing costs have your head spinning and second guessing buying a house… remember that assistance might just be the secret weapon you need.
Here’s to smooth sailing through the home-buying journey! If you are interested to see if closing cost assistance is something you can benefit from, give us a call to see how we can help!