Most people believe that as soon as they have arranged for a down payment, they are financially prepared to realize their homeownership dream. When budgeting for a home purchase they completely forget about closing costs. At Buyer Investor Match, we work with credit-challenged buyers and always advise them to factor in closing costs also when deciding on their budget (Related article: Buying a home? Important things to consider when deciding on your budget). Closing costs can amount to nearly 4 percent of the purchase price. So if you are buying a home worth $300,000, your closing costs will be about $12,000.

In our ‘No Credit Check – No Income Verification’ system, an investor buys the home of your choice and sells it to you usually on the same day. You reimburse the investor for the exact closing costs they pay to acquire the home. Even when you are buying a home directly from the seller with a conventional mortgage, you need to pay more or less same types of closing costs. For this reason, you should understand your obligations with regard to closing costs. Here are some of the closing costs buyers are expected to pay when purchasing a home:

Home inspection fee

You can buy a home as-is or have a professional home inspection performed in order to evaluate the property’s condition. A home inspector will point out defects with the property. These defects could be either structural such as a leading roof or cosmetic such as peeled-off paint.

Appraisal fee

If you are taking out a mortgage from a bank, the lender will ask you for an appraisal to determine the market value of the property. An appraiser will determine the value based on the property’s location, condition, size, amenities and other factors. Lenders use the appraised value to come up with the loan-to-value (LTV) ratio and accordingly decide how much loan you qualify for. Buyers are required to pay appraisal fee.

Title search and recording fee

A title search is performed by a licensed title inspector in order to ascertain if the title of the property is clear and there are no liens or judgements that can affect the transfer of the title from the seller to the buyer. The title deed and other documents are recorded with the local county office after the closing. Buyers are expected to pay title search fee and recording fee.

Home warranty

Home warranty protects you in case a new appliance or system installed in the house breaks down. Either you or the seller is expected to pay home warranty.

Property insurance and property taxes

Homeowner insurance (HOI) provides financial protection against any losses occurring to your home, disasters and liability arising out of accidents that may happen at the home or at the hands of the homeowner. Similarly, a homeowner has to pay property taxes to the local county government. This amount is calculated based on how much the buyer and seller must pay for the prorated portions of the tax year.

A consideration

Closing costs vary from deal to deal. Who pays what largely depends on the agreement reached between you and the seller in this regard. Here at Buyer Investor Match, we help credit-challenged people buy homes of their dreams with owner financing. Since you won’t be dealing directly with the seller, our negotiators will try to minimize your closing cost liabilities.

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