Preparing Yourself for House Closing Costs

closing cost on house

House closing costs are the costs and adjustments owed at closing by both the buyer and the vendor. House closing costs may differ from state to state, but the following information will help you understand the types of costs you may incur.

Prior to closing day, your lender should give you a listing of itemized house closing costs associated with your loan. The list should be exhaustive, but infrequently it’s not. Some of the most common items missing include: attorney fees (if any), tax adjustments, oil adjustments, title insurance tip, and other closing adjustments.

If you find any of these things missing from the closing cost estimate provided by your lender, ask your lender about them. Request an in-depth list of ALL possible adjustments and fees you may incur.

House closing costs are paid by the buyer, or the vendor, depending on the price. For example, the vendor will pay a sales tax or conveyance tax in most states. In some cases, the vendor even pays the closing costs of the buyers. When the vendor pays these closing costs, it is referred to as a seller’s concession.

The Seller’s Concession

A seller’s concession helps the buyers finance their house closing costs. Fundamentally , the closing costs are estimated in advance, and that amount is added to the sales price of the house. The vendor then pays the closing costs of the buyer with these extra funds.

An Example

Let’s say the purchase cost of a home is $150,000, the mortgage amount is $135,000, and the computed house closing costs are $6,000. In that case, the seller’s concession would adjust the figures in the contract to a sales price of $156,000 and a mortgage of $141,000. The extra $6,000 the vendor earns would essentially be used to pay the purchaser’s closing costs. Of course, this would need to be spelled out in the contract.

Financing Closing Costs

Some banks let buyers finance closing costs without using the seller’s concession. If you’d like to reduce your out-of-pocket costs, talk to your lender about your options for financing your house closing costs. Just keep in mind that you are going to be paying interest on this higher loan amount.

The key is to be informed and prepared. That implies maintaining a listing of expected house closing costs and comparing it against the projected costs prepared by your lender. Feel free to ask questions, and make sure you have the most accurate information possible so you may be prepared for the closing.

Most banks give accurate estimates for house closing costs. But there are some banks who do a less accurate job, and there’s always the chance for human error. Rather than accept the closing cost estimate at face price, dig deeper until you are confident the estimate you received incorporates all closing costs.

Tax Adjustments

The most significant expense commonly left off the list are tax adjustments. Tax adjustments can be hundreds or thousands of greenbacks. Guarantee tax adjustments are considered in your house closing costs guesstimate. Otherwise, you may be unprepared for the amount of funds do on closing day.