Buyer closing costs are essentially the extra money that is needed order to buy a home. Closing costs are in addition to the down payment. When you are beginning to apply for a loan or making an offer on a home, this phrase will come up. There are several decisions you can make regarding how and when you pay these fees.

What is included in buyer closing costs?

There are many different fees and charges that make up buyer closing costs. The fees will all be listed on your Buyers/Borrowers Closing Statement. You can ask any remaining questions during closing. The closing meeting can be confusing because there are so many documents to sign and discuss. Many people go through them line by line with their buyer’s agent before the meeting. Here’s what to look for:

Fees for the Appraisal

Credit Report Fee

Interest on loan

Home Owner’s insurance (1 year up front)

Property Taxes (1 year up front)

Closing Fee to Title Company

Title Charges (owner and lenders policy)

Water Transfer Fees

Your exclusive buyer’s agent will be able to give you an estimate of the closing costs before you make an offer. That way, you can budget appropriately.

Most of these fees and charges cannot be reduced, but you can shop around for home insurance and this can make a big difference in you closing costs.

When are buyer closing costs paid?

They are paid at the closing meeting. Typically they are included as a lump sum along with your down payment, which is usually paid with a cashier’s check or by wiring the funds.

There are two different ways to pay your closing costs.

You can pay your own closing costs, or, another alternative is to ask the seller to pay them. You will make this decision at offer time.

If you ask the seller to pay closing costs it generally increases the sale price of the home by the same amount. For example, you could offer $215,000 on a home and pay your own closing costs of approximately $5,000. Or, you can offer $220,000 on the same home, and ask the seller to pay your closing costs.

Both options have pros and cons

Pros to the seller paying: you will not have to have the cash for these fees at your closing meeting. Cons to financing closing costs: You will be paying interest on your closing costs.

Pros to paying the costs yourself at closing: When you pay in “cash”, you don’t have to worry about getting a bigger loan to finance these costs. Cons: You will need to budget for these costs along with costs to move, any repairs that need to be made to the home before moving in, and down payment.

You may wish to discuss the pros and cons of your situation with your agent to decide the best course of action. It is wise to look for homes in a price range that also takes into consideration the closing costs.

Learn more about buyer closing costs. Stop by Kathleen Chiras’s site where you can find out all about how a buyer’s agent can help you with closing costs.