When you buy a home, you will have to pay many additional costs that are not charged by your mortgage lender. These are called closing costs and can add up to thousands of dollars. Understanding what cash to close means can help you prepare for these costs ahead of time so you don’t have any sticker shock when it comes to closing on your new property.
Closing Disclosure vs. Loan Estimate
Your lender will send you a document called the Closing Disclosure a few days before your home closing. This is a five-page document that outlines all of the fees and expenses that you will be responsible for when you get your home loan.
The first page of the Closing Disclosure will show a list of closing costs that you’ll need to cover before you can close on your home. These include title insurance, private mortgage insurance (PMI), and origination fees. Learn more https://www.naples-group.com/
Down Payment – The biggest cost in your cash to close is your down payment, which is the amount of money that you need to pay upfront to lower your loan amount and increase your home’s equity. This is a percentage of your purchase price, and it can vary depending on the type of loan you choose.
Credits – Your lender and seller may both have credits for your home loan that you can use to reduce your cash to close. These can include prepaid items such as taxes and insurance, or even lender-paid points.
Earnest Money Deposit – This deposit will be deducted from your cash to close, along with any fees that you paid before closing. It will also include any seller credits, which are costs that the seller has agreed to pay.
Lender Credits – These are also deducted from your cash to close, and can include any fees that you’ve paid for your loan. These can include points, which are fees you pay to the lender for lowering your interest rate, and PMI, which is a type of private mortgage insurance that you must pay if you have less than 20% down on your home loan.
Other Expenses – The Closing Disclosure will also list other charges that you’ll need to pay before you can close on your home. These can include title searches, inspections and more.
Using Real Estate Agents to Find a Home
It’s important to hire an experienced real estate agent who will be able to guide you through the process of buying a home and ensure that you are getting a fair deal. In addition, your real estate agent will be able to explain the different forms of financing available to you.
Then, your real estate agent will help you determine the maximum price you can afford to pay for your home and will help you prepare a competitive offer on your dream house. This will help you avoid being overbidding on the property, which can result in a lower sale price.
