What Are Closing Costs, And Why Do You Have To Pay Them?
Go Back To Previous PageWhen you’re trying to buy a home, the actual price of the house is only one of many things you’ll have to pay. You already might know about fees
related to inspections and expenses that your real estate agent may have. However, one of the more nebulous terms you’ll hear is the “closing cost” of a real estate transaction. What exactly are those costs, and why do they matter? Where can I find a closing cost calculator? This is more tricky than when you buy BNB.
Closing costs are additional taxes and fees paid during a real estate transaction. These costs include lawyer, appraisal, mortgage, and title fees. For the transaction to go through, buyers and sellers must pay these costs.
Those costs represent as much as 10 percent of your home’s price, making it a huge expense you must consider.
What Kinds Of Fees Are Involved In Closing Costs?
There are many different fees you will have to pay for the transaction. These include (but are not limited to):
- Mortgage and title insurance
- Appraisal fees
- Legal fees
- Title fees
- Paperwork fees
- Mansion taxes
- Title transfer taxes
- Real estate commissions
Who Pays For Closing Costs?
Both buyers and sellers have to put money towards closing costs.
Traditionally buyers will have to handle mansion tax, mortgage recording tax, mortgage insurance, and title insurance. Also, sellers must pay the transfer tax and real estate agent commissions.
Any additional fees may be required to pass the title to the buyer successfully.
Can You Negotiate Who Pays Closing Costs?
One of the most beautiful things about real estate is that everything is negotiable—including matters like closing costs. If you want to get a buyer or seller to take on more of the costs, it is possible.
All you have to do is discuss the matter with your real estate agent, and they can help facilitate these talks with a bit of tact.
Is It Possible To Avoid Closing Costs?
Sadly, most people will have to pay closing costs for their real estate deals. It’s just the way things are. However, you can avoid some of its fees if you know how.
For example, buying a property under $1 million will help you skirt the mansion tax. Also, purchasing an FSBO may cut real estate agent commissions.
Even so, all homes in NYC will require attorneys’ fees as part of the title transfer fee, and you can say the same about certain taxes and insurance policies.
What Can You Do If You Can’t Afford The Closing Costs?
Let’s say you have the money for a home but don’t have enough to afford the closing costs. Does this mean “game over?” Not quite, and you may still be able to push things through. Here’s what you can do:
- Negotiate some of the costs. This may make it possible for you to get the house you want as a buyer. Sellers would have to be motivated (and generous) to do so, but they may still do it. Sellers can cover costs by raising the asking price.
- Pare down any closing costs you can. Get a cheaper home. Getting an appraisal waiver, while risky, can help push you back into the realm of affordability.
- Get a Purchase CEMA. A CEMA is a Consolidation Extension Modification Agreement, which means you’re assuming the loan of the old homeowners. You then will get to refinance it to tailor the loan to your needs and your abilities. This skirts your need to pay most, if not all, closing costs.
- Consider asking for help with your closing costs through NYC’s HUD. New York City has a lot of different programs that can make home ownership more accessible, including down payment assistance and covering those costs. You can find out more by checking out NYC’s HUD Site.
Before You Put In An Offer, Ask About Closing Costs
It may seem like you can afford that brand-new home initially, but if you are very tight on cash, you may have to rethink things. You have a real estate agent and brokerage that works with your budget matters here.
If you’re worried about affording closing costs, it may be time to call a broker who understands you. We’re here to help.
