Attention Buyers: Are You Ready To Pay Your Own Closing Costs?

Closing costs cost more than many buyers often realize.

Before embarking on your home buying journey, it’s important to know whether you’ll want to pay all, some, or none of your closing costs. Closing cost can cost as much at 2% to 5% of your purchase price, which can add up to a fairly hefty bill. When added to your down payment, that can end up being way more than you want to spend.

So, in this post, we’ll help you evaluate whether or not you want to pay your closing costs when you buy a Knoxville home.

What Are Included In Your Closing Costs?

Closing costs are of the fees that are associated with closing your real estate transaction. Here are some examples of closing costs that Knoxville  home buyers pay at closing:

  • Origination Charges
  • Appraisal
  • Credit Report
  • Closing Fees
  • Lender Title Insurance
  • Owner’s Title Insurance
  • Title Examination
  • Discount Points
  • Recording Fees
  • Transfer Taxes
  • Escrows
  • Taxes
  • Mortgage Insurance

These are just a few of the examples of the closing costs a buyer can expect to play at closing. Many buyers can be caught off guard when they realize how expensive closing costs can be. This why it can be so important to have an idea of  how much closing costs will cost you before you think about buying a home.

If closing costs will be more than what you want to pay, it can help to know that in advance so that you can try and get them covered by the seller.

How Much Can The Seller Pay?

The seller always has the option to pay part or all of your closing costs.  The loan type will determine how much a seller is allowed to pay on behalf of the buyer.

Here are a few different examples of how much a seller is able to pay on behalf of a buyer based on the loan type:

  • Conventional loans allow the seller to pay up to 3% of the purchase price in closing costs. That should cover most of the closing costs for a conventional loan.
  • FHA loans allow the seller to pay up to 6% of the purchase price in closing costs. That should cover most of the closings costs as well.
  • With VA loans, though, the seller can pay all of your loan related closing costs. You can also ask the seller to pay for up to 4% of the concessions which can cover non-loan related costs.
  • In cash transactions, the buyer typically will pay their own. But, it is always possible to try and get some of them covered.

It’s important to know how much a seller can be able to pay on behalf of you, that way you can be sure to include it in your offer.

How Do Closing Costs Affect The Overall Transaction?

It’s a seller’s market. So, when you ask a seller to pay your closing costs, you’ll want to seriously take that into account when you write an offer. Homes are selling at or above list price.

So, you’d be crazy to ask for the seller to cover  6% of the purchase price in closing costs and an offer price that’s $5,000 below the list price. Not only would the seller be taking a $5,000 loss, they would also be responsible for paying your closing costs. If the house is listed for $100,000, that would be an additional $6,000 they’d be taking a loss on. In a seller’s market, there’s a very rare chance that a seller would be taking that much of a loss.

In most cases, if you want your closing costs covered, you’ll wrap that into the price you offer. For example, if a home is listed for $200,000, and you need $5,000 in closing costs, you’d up the price to cover all or some of your closing costs. This can help soften the blow to the seller and make it more likely that you’ll cover the closing costs.

Ultimately, it’s your choice what you offer. It’s just important that you take that into account as you write an offer.

Making The Right Decision For You

When it comes to deciding about closing costs, it’s ultimately an personal decision. Would you rather pay for the costs up front or pay for the costs by upping the sale price? You’re going to pay for it in one way or another, it’s just about finding the right decision for you.

If you don’t have a lot of cash on hand, then you may opt to up the purchase price to cover your closing costs. But, if you’d rather not pay more for a home than you’d have to, you may opt to pay all or some of your closing costs.

Are you thinking about buying a home this year? Please let Knoxville Home Team know if there is any way that we can assist you in your Knoxville home search. Rick can be reached at 865-696-9002 or via email at Rick@KnoxvilleHomeTeam.Com. Kati can be reached at Kati@KnoxvilleHomeTeam.Com.

Also, be sure to check out our Knoxville Home Search Page to see what homes are for sale in the area.