Be Prepared for Closing Costs

Twin Cities Closing Costs

Saving for a down payment in preparation for buying a new home is pretty common knowledge. Most mortgages that allowed zero down payments have disappeared except VA & USDA Mortgage Loans. While FHA and VA loans still offer little to no money down, most potential homebuyers will need to save at least 3.5-20% of the home value.

Home Purchase Closing Costs

Unfortunately, many first-time homebuyers are dismayed to learn that in addition to the down payment, they also will need to plan for closing costs. The national average for closing costs ranges from 2-4% of the purchase price, which adds considerably to the amount of savings needed to buy a home. In addition, most lenders also require a savings reserve equal to at least two months of the mortgage payment. Needless to say, it adds up.

Let’s break these costs down.

Closing costs include fees charged by the escrow or closing attorney, as well as costs associated with obtaining a home loan, including:

• Escrow fees
• Title search and filing fees
• Appraisal fees
• Home inspection fees
• Wire transfer fees
• Loan costs – These include what are termed “points”; each point is 1% of the purchase price and is used as both commission for the lending officer and as an upfront fee to reduce the loan interest rate.

These are just a few of the extra costs associate with buying and closing on a new home. It’s important to know these costs ahead of time, so potential homebuyers can save the appropriate amount of money needed to buy a home. Nobody wants to be surprised by unexpected costs and and end up missing out on the perfect property.

Twin Cities Minnesota Realtor

What Are Seller Contributions Towards The Buyer’s Closing Costs?

MN Real Estate Closing Costs

Whether you’re buying or selling a condo or a home in Minneapolis, St Paul or the surrounding suburbs, you’ll want to know what are the seller contributions towards the buyer’s closing costs.  These contributions can be a powerful incentive for selling a property because closing costs can add up very quickly. In some cases, closing costs can be between 3% and 6% of the purchase price.

How It Works

Once the buyer and seller agree to the sale price, the buyer may ask the seller to contribute toward closing costs. The sales price may be increased by a certain amount, which offsets the closing costs to be paid by the seller. An written agreement is prepared to make the arrangement official.

Limitations to Contribution Amounts

Depending on the type of mortgage loan, there are limitations to how much a seller can contribute toward the buyer’s closing costs. For example, with an FHA loan and a minimum 3.5% down payment, the seller can contribute up to 6%. With a VA loan, the seller can contribute up to 4%.

What Kinds of Closing Costs Can Sellers Pay?

Allowable seller contributions towards the buyer’s closing costs will vary somewhat depending on the type of loan. Typically, these allowable closing costs will include:

  • Title service fees (title searches, title examinations, etc.)
  • Lender’s title insurance
  • Owner’s title insurance
  • Mortgage rate discount points
  • Prepaids
  • Debt and/or judgment payoff (with VA loans)
  • Funding Fee (for VA loans)

Certain expenses are generally excluded from the seller’s contributions for closing costs, depending on the type of mortgage loan.

RE/MAX Results
Shannon Lindstrom, Realtor®, AHWD, NCS
Direct: 612-616-9714
Lindstrom_S@msn.com
Shannon@ShannonLindstromRealtor.com
www.ShannonLindstromRealtor.com
www.ShannonLindstrom.info

What is real estate closing costs?

MN Real Estate Closing Process

Real estate closing costs are fees paid at the time of closing in addition to a down-payment. The closing fees can vary depending if you are paying cash or using a mortgage to purchase a real property. The buyer’s closing fees can be anywhere from 3.0% to 6.0% of the purchase price.

The Closing Disclosure is a document which is used to ­list the services and fees incurred with purchasing or refinancing a home.   

When applying for a loan, the mortgage lender will provide you a loan estimate form. The document includes an estimate for the following: the loan fees, fees paid in an advanced, title charges, taxes & insurance escrow, government charges, and additional fees. Remember, the loan estimate form displays an estimate of closing fees and the Closing Disclosure is the actual closing fees. Real Estate Settlement Procedures Act (RESPA) requires that the Closing Disclosure is given to all parties of the real estate transaction no later than three business dates prior to the schedule closing.

Please find below a few definitions of closing services and fees are displayed on a Closing Disclosure:

Lender Origination Charge –  A fee charged by the mortgage lender for providing services and also processing a loan.

Mortgage Insurance Premium – An insurance policy compensates the lender for losses if a borrower default.

Escrow Taxes & Insurance – A mortgage loan may require an escrow for a certain amount which would be used for future taxes and insurance. The escrow amount is determined by the mortgage lender.

 Title Services and Lender’s Title Insurance – The fees for all services associated with the specifications of the title insurance and the services of title.

Owner’s Title Insurance – An insurance policy in which protects the owner against title disputes that occurred before the date of the policy.

Government Recording and Transfer Charges- The fees that are charged by state and local government agencies for legally recording your deed, mortgage and other related documents.

Recording Deed & Mortgage
City/County Tax Stamps
State Tax/Stamps
Conservation Fee (to county the property is located)
Recorded Well Certificate (if applicable)

There is an option, you can ask the seller to pay all or a portion of your closing costs.

Seller Contributions Towards Buyer’s Closing Costs – A seller pays a percentage or a dollar amount toward the buyer’s closing costs at closing.

If you are looking to buy a new home or condo in the Twin Cities, feel free to contact RE/MAX Results – Shannon Lindstrom, Realtor @ 612-616-9714 or visit www.ShannonLindstromRealtor.com today.

MN Homebuyers