One of the most common questions asked by homebuyers is, “What are closing costs?” and “How much should I have to pay upon closing?” Closing costs is the collective term that refers to all the fees and charges that the buyer and the seller are obligated to pay at the closing, or settlement, of a home purchase. In general, it is the buyer who shoulders most of the closing costs. However, the buyer can negotiate with the seller to pay for some or all of the costs.
The fees and legal requirements included in the closing costs would differ, depending on the state and municipality of the property so, if you are planning to purchase a house in the North Dallas, Texas area, it is in your best interest to look for a qualified and experienced real estate professional who can provide you with all the information and guidance that will enable you to get the best deal out of your real estate transaction.
Average Closing Costs in Texas
If you’re buying a house in Texas, the total closing costs can range from 1% to 7% of the purchase price of the property. Typically, the buyer pays 3% to 4% of the closing costs, while the seller pays 1% to 3%.
It is important to note that, although closing costs are usually shared by both the buyer and the seller, nothing is set in stone. Who pays what is negotiable so it’s crucial that you know all the closing costs and which ones you can ask the seller to shoulder.
Typical Closing Costs for Homebuyers and Sellers in North Dallas, TX
- Application Fee
- Appraisal Fee
- Courier Fee
- Credit Report Fee
- Escrow Fees
- Home Inspection
- Lender’s Title Insurance
- Origination Fee
- Prepaid Interest
- Recording Fees
- Survey Fee
- Title Search Fee
- Underwriting Fee
- Title Insurance for the Buyer
- Escrow Fees
- Mortgage Payoff and Possible Prepayment Penalty
- Prorated Property Taxes
- Recording Fees
- Settlement Fees
- Other Amounts Owed (i.e., HOA Fees and Utilities)
7 Ways a North Dallas, TX Homebuyer Can Lower Closing Costs
While the list of closing costs can be quite overwhelming, remember that these are not set in stone and that there are a few things you can do to reduce these fees and charges. Here are some tips for home buyers in North Dallas, TX on how to lower closing costs:
1. Ask the Seller to Shoulder Some of Your Closing Costs
Usually, the buyer is responsible for most of the closing costs. The seller, on the other hand, pays for the real estate agent commission, along with a few other closing costs as mentioned above. However, it is not uncommon for sellers to share in the costs that are typically charged to the buyer. You can ask your seller to help you with some of the buyer’s closings costs and, if they agree, this will be reflected on the loan estimate form as seller credits.
2. Request for Loan Estimate Forms from Multiple Lenders
Lenders are required to give you this form within three days of completing a mortgage application, but you can request for this so you can get it sooner. A Loan Estimate Form shows an itemized list of closing costs. By requesting this form from several different lenders, you can compare and see which one is able to offer you the best deal.
3. Negotiate for a Reduction in Lender Fees
You can bargain with the lender to waive your application and processing fees. Most lenders may not be willing to lower their origination fees, but it helps to know the average rate for this expense as you are considering your options. The origination fee is usually 0.5% to 1% of the loan amount. So, if you are seeing rates above 1%, you know that you need to shop around for lower rates.
4. Shop Around for Lower Priced Vendors
Lenders would usually indicate vendors on the Loan Estimate Form that they have given you, but that does not mean that you need to confine your options to the ones listed on the form. You may want to ask the lenders for other referrals, or you can also do your own research. Doing this extra task can mean saving hundreds of dollars in closing costs. So, once you get your loan estimate, be sure to check the list of vendors and hustle to get less expensive ones.
5. Ask Your Lender About Points and Rebates
Simply put, discount points and lender credits let buyers make tradeoffs in how closing costs and mortgage are paid. With points, you get a lower interest rate in exchange for paying for an upfront fee. On the other hand, lender credits lower your closing costs in exchange for incurring a higher interest rate. If you have a limited budget and are willing to shoulder the higher interest rate, then this is an ideal option for you. Otherwise, discount points would be more beneficial in the long run.
6. Roll Closing Costs into Your Mortgage Balance
This is a good option to consider if you don’t have enough cash to pay the closing costs. It is important to note that rolling your closing costs into your mortgage would translate to paying interest on the closing costs over the life of your loan.
7. Schedule Your Closing at the End of the Month
By simply setting your closing date at the end of the month, you can reduce your cash outlay. This is because your first mortgage payment is usually due on the first day of the succeeding month, and so closing at the end of the month would reduce the number of days to which the per diem interest is applied.
If you are in the market to buy a home in the North Dallas, TX area, our team will be more than happy to show you all your best options in this location. Feel free to give us a call at 214-673-9548 or send me an email at [email protected] to schedule an appointment.