You’ve found your dream home and negotiated a good price. But, hold on, that’s not what you’ll pay. There’s an additional set of expenses: closing costs. Let’s look at what these costs are and how you might pay less.

What are closing costs?

The list of fees associated with buying a home can shock first-time home buyers. There are usually expenses for appraisals, inspections, loan processing, mortgage insurance, title insurance, survey fees, attorney fees, and more.

These fees vary by location. Some states, for example, charge transfer taxes on real estate sales; Texas does not. As Texas doesn’t require a real estate attorney for a home sale, closing costs in Texas might not include legal fees.

How much should you expect to pay?

Experts, including Freddie Mac, agree that closing costs generally land between 2% and 5% of the home’s purchase price. For example, if you’re buying a home in Dallas, where the median sale price is $500,000, closing costs could range from $10,000 to $25,000.

Can you reduce your closing costs?

Yes. If you want to get your closing costs near the lower end of the 2% to 5% range (or even down to 1%), you can:

  • Bargain with the seller. It’s the buyer’s responsibility to pay most of the closing costs. However, sellers often pay for title insurance, real estate agent commission fees, homeowners’ association fees, and other costs. Negotiate closing costs where you can; a Redfin study found that nearly half of home sellers make concessions to home buyers.
  • Compare loan types. Some mortgage programs, such as VA loans and FHA loans, can have higher fees at closing than others. Insurance requirements can also vary by loan type.
  • Shop for home insurance. It’s a good idea to get written estimates from two or more insurance providers. You might consider an insurance broker to get the best deal.
  • Look for assistance. Down payment assistance programs, usually reserved for first-time home buyers, can help with the down payment and the closing costs. Most programs exist at the state, county, and city levels of local governments. Here, you’ll need to do some homework, starting with agencies such as the Texas State Affordable Housing Corporation and the Texas Department of Housing & Community Affairs.

To better understand closing costs and other important aspects of the home-buying process, speak with one of the loan experts at the Decker Group at First United. Call us at (972) 591-3097 or connect with us online.