Closing Costs and Fees Overview
Whether you are purchasing a home or are refinancing, the mortgage settlement process (also called mortgage closing) can be confusing and involve many people, documents, and fees. The more you know about the settlement process, the better your chances are for saving money.
Different regions of the country have different practices regarding who pays for what at closing. Buyers and sellers are free to negotiate certain costs and fees into the sales contract. In fast-moving markets, the buyer may have to agree to pay more costs to close the deal. In slow-moving real estate markets, the seller may agree to pay points or fees for the buyer (although it may increase the property price). Because practices vary significantly from area to area, it is difficult to provide estimates for closing costs that apply everywhere. However, a rule of thumb for buyers is that closing costs will be about 3% of the price of the home, or in some relatively high-tax areas, 5% to 6%.
Some settlement costs can be more expensive if your credit rating is low, such as homeowner's insurance, private mortgage insurance (PMI), or points. Knowing your credit score can help you understand how lenders will evaluate your applications. Since December 2004 your lender is required to give you a copy of your credit score.
You can reduce some settlement costs by shopping around for the services and negotiating with the seller, your lender, and your attorney or settlement agent.
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