Buying a home is an exciting time in a person’s life, but it can also be stressful and overwhelming. There are many costs associated with buying a home in addition to the price of the house, and a lot of that can come with the closing costs. So, what should first-time homebuyers know about closing costs? We have put together a guide to help you prepare to buy a home, especially if it’s your first. Plus, we offer a special discount on closing costs for first-time homebuyers!

What Are Closing Costs?

Closing costs are the fees and expenses that allow you to finalize a home purchase. This can include mortgage-related fees, property title insurance, inspections, taxes and more. You will receive an estimate for your closing costs within three days of filing your mortgage application. As you approach your closing date, your lender will alert you to any anticipated changes to the costs quoted. Then, a few days before closing, you will receive what’s called a closing disclosure; this will confirm the final fees that will be due at the closing. Closing costs will vary based on the size of the home, down payment, type of loan you chose and any negotiations you make with the seller. Typically, closing costs range from 2% to 5% of the price of your home.

Closing Costs: Breaking It Down

You know closing costs are necessary to the purchase process, but you may be wondering: What exactly am I paying for? Here, we explain the specifics of this homebuying expense. Note that most closing costs are due on your closing date, but some may be due sooner.

Costs before Closing Date

• Earnest money: This is not technically a closing cost, but buyers are asked to provide what is known as earnest money as a show of faith toward the seller when they sign the offer to purchase and the home purchase contract. This could be as much as 1% to 5% of the purchase price. This cost can then be used towards closing costs or your down payment at the time of closing.
• Appraisal: An appraisal is required to make sure the home price is justified. This is usually about $500 to $690 but could be more for a larger home.
• Home inspection: A home inspection is necessary before closing to make sure the home has no major structural issues before purchasing. This cost could be about $500 or higher depending on the size of the home.

Costs at Closing

• Points: If you choose to, or have to, pay points as part of your loan, they are charged as a percentage of the loan. By paying a point at closing, you can get a lower interest rate.
• Credit report: The lender will charge you to check your credit, which is usually about $50 to $75. Make sure to unfreeze your credit reports before applying so a lender can pull your credit report.
• Flood determination: A lender must determine if the property is in a flood zone. This is usually only about $15.
• Tax monitoring services: This is to ensure property taxes have been paid through the life of the home. This could cost $50 to $100.
• Title-related costs: The lender will conduct a title search and take out title insurance to make sure there are no complications. The search fee is usually around $350, and the insurance is usually a half percent of the home value.
• Homeowner association fees: Not everyone will have this fee but if you are joining a homeowner’s association, those fees will be due at the closing.
• Document and processing fees: These are often called “origination fees” and can include underwriting, application processing and other administrative tasks. These costs will vary by institution.
• Attorney fees: A buyer may want representation throughout the process and at the closing. This cost will vary depending on the attorney’s fee structure.
• Home insurance: Whether the insurance payment is in escrow or not, lenders usually require the buyer to pay the first year at closing.
• Property taxes: At closing, you will likely pay taxes for the rest of the year, or at least for the next six months. This cost varies depending on where you live.

How Can Homebuyers Reduce Closing Costs?

Negotiating with the seller is one way to minimalize costs for the homebuyer. Sometimes if the house needs some work, the seller will pick up the closing costs to help “cover” some of the work the buyer needs to do right away. Or the seller may lower the asking price, which could then allow the buyer to use some of their planned down payment for closing costs.

If you use Cornerstone as your lender, we offer $750 off your mortgage closing costs if you are a first-time homebuyer,* in addition to our competitive rates on all lending products. We want to help make your dream home a reality. When it comes to what first-time homebuyers should know about closing costs, we can help every step of the way. Contact us to get started today!

*Only valid on first-time homebuyer applications approved and closed with Cornerstone Bank. Other fees may apply. Validated coupon must be received no later than ten (10) days prior to closing or the offer is null and void. Valid only for residential owner-occupied mortgage applications received by Cornerstone Bank. At least one applicant must be considered a first-time homebuyer. Valid for applications dated on or after July 1, 2021, through September 30, 2021, with a closing date on or before November 01, 2021. Speak with a Mortgage Loan Officer for details. Cannot be combined with any other offer. Only one (1) coupon per mortgage application allowed.

What is your New Year’s Resolution? If you are a homeowner, and your resolution has to do with saving money, we can help. Low-interest rates and the option to change the terms of your loan are great reasons why you should refinance your home in the new year.

Reasons to Refinance

Refinancing your mortgage is essentially taking out a new loan to replace your old mortgage. We can help you make this process quick and efficient. It may seem intimidating, time-consuming and costly to refinance, but it is a fairly simple process and moves much faster than your original mortgage application. For most people, the cost-saving benefits in the end far outweigh any upfront costs and we can help to make sure when you refinance, it is the most affordable option for you. Here are some reasons to refinance:

• Pay off your loan quicker with a shorter term. If you had a 30-year mortgage at the start but want to shorten to 20, you will be able to do this when refinancing. Although this option will raise the amount of your monthly payments, the loan will accrue less interest over time and therefore save you money in the long run.
• Get a lower interest rate. Current interest rates are at historic lows and very well may be lower than the one you have now. By refinancing, you are able to pay less interest each month, saving you money.
• Switch between loan types. When refinancing, you can change your loan from a fixed-rate to an adjustable-rate mortgage or vice-versa. There are benefits to both depending on your current situation and how long you plan to stay in the home.
• You have gained enough equity in your home to refinance into a loan without mortgage insurance. This is another way to save you money, without having to also pay the mortgage insurance every month on top of the mortgage payments.
• You are looking to tap a bit of your home equity with a cash-out refinance, which gets you some cash in hand for whatever you may need. This is essentially a loan that is more than the amount remaining on your current mortgage and is a great way to pay down existing debt that is at a higher interest rate.
• Your credit score has increased. Another great reason to refinance is if your credit score has improved. Having a higher credit score ensures you a better rate than when you originally borrowed, and you may be able to get better terms as well as you are now a more trustworthy borrower.

It is best to come up with a goal when deciding to refinance to be sure it is really in your best interest. Our experts will be able to help you through the entire refinancing process from deciding what is best for you, to signing the final papers. Contact us today to get started.