What Are Closing Costs Used For in Illinois Real Estate Transactions?

 Posted on May 28, 2021 in DuPage County Real Estate Attorney

When you are a first-time homebuyer, the experience of shopping for your home can be confusing and overwhelming. While you are probably excited to find a place that you can make your home, you are also likely to be very cognizant of the financial side of things. Things such as the interest rate of your mortgage, taxes on the property, and the cost of the home itself can all affect how much you can expect to pay for your home. However, there are also other costs that many people forget about during the home buying process - closing costs. Understanding what your closing costs are and what the funds are used for is an important step toward purchasing a home.

What Are Closing Costs?

When you purchase a home, there are certain fees associated with the closing, or finalization, of the purchase. These costs together are typically referred to as closing costs and include a variety of fees and charges. In general, closing costs usually total to be around 2 to 5 percent of the total purchase price of the home, though the final costs largely depend on the location you are purchasing the home and other factors.

What Is Covered by Closing Costs?

There are a variety of things that the closing costs pay for. You will be able to see all of these itemized costs listed out on the estimate given to you by your lender, but typically they include things such as appraising the home, the cost associated with performing a title search, etc. Items that are often lumped together under the umbrella term of closing costs can include:

• Loan fees: These can include things such as the application fee, attorney fees, the origination fee, and perhaps even a credit report fee.
• Appraisal fees and home inspection: These fees cover the cost of having the home inspected for code violations and appraised to assess its value.
• Mortgage insurance: If you made a down payment of less than 20 percent of the purchase price of the home, you will likely be required to purchase private mortgage insurance. In addition to that, if your mortgage is backed by the Federal Housing Authority (FHA), Department of Veterans Affairs (VA), or U.S. Department of Agriculture (USDA), you will have to pay an additional fee for a loan guarantee.
• Discount points: Some lenders offer the option of purchasing discount “points” in exchange for a lower interest rate. Typically, each point is 1 percent of the purchase price of the home.
• Title fees: You will also have to pay costs associated with the title of the home, such as title search fees or title insurance. Title search fees pay for the process of looking up the title of the home and determining whether or not anyone else could claim ownership.

Our DuPage County Real Estate Lawyers Can Help

Shopping for a new home can be an exciting process, but it can also be expensive. There are things that you can do to lessen the price of your closing costs, like contacting a knowledgeable Wheaton, IL real estate attorney. At Stock, Carlson & Duff, LLC, we can help you ask for assistance with closing costs from the seller and ensure your transaction goes as smoothly as possible. To schedule a time to discuss your situation, call our office today at 630-665-2500.

Sources:

https://www.nerdwallet.com/article/mortgages/closing-costs-mortgage-fees-explained

https://www.investopedia.com/terms/c/closingcosts.asp