What are closing costs and who pays for them?
Closing costs are the fees that are charged for the services involved in getting a loan. These expenses are charged to the borrower and cost between 3% and 6% of the amount being borrowed. Typical closing costs include loan application fees, credit report, title search and insurance fees, property appraisal, recording fees, title company fees, and prepaid interest, as well as escrow account deposits, pro-rated property taxes, and property insurance. Closing costs can vary depending on the type of loan program. Watch out for “junk fees” that are charged by some mortgage lenders, which can be quite expensive. The borrower is responsible for most of the closing fees, but they can be negotiated into the purchase price or added to the purchase price, depending on the loan program.
First, the responsibility of who pays for closing costs is always negotiable. Local custom may dictate which fees the buyer will pay and those the seller pays. Typically in Louisiana, the buyer pays for home inspections, deed preparation, title search and recording fees. He or she may also pay for title insurance, since this is required by the lender. The buyer is also responsible for any fees or costs associated with obtaining the purchase loan, appraisal, survey, etc. The seller customarily pays the real estate agent’s commission, as well as his share of attorney fees and cancellation of mortgage fees. Who will pay for what closing costs should always be clearly spelled out in the purchase offer. A creative sales associate will consider the cash, income and tax situation of the home seller and the buyer when constructing an offer. For instance, if the buyer is short of cash, the agent may ask the seller to pay the buyer’s loan points up front in exchange for some other concessions fr
