Know Your Closing Costs

Sep 9, 2024

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You’ve saved up your downpayment and found the perfect house to buy. But have you considered closing costs?

They’re really the first big expense you’ll have with home ownership. Which can you negotiate, and which are set in stone?

The Hidden Costs of Homebuying: What You Need to Know About Closing Costs

Buying a home is an exciting milestone, but amidst the thrill of owning your first house, it’s easy to overlook the long list of closing costs that come with it. Many people think that because these costs are often rolled into the mortgage, they don’t need to worry about them. However, understanding and negotiating these costs can save you a significant amount of money in the long run.

For a typical mortgage, closing costs usually range between 3% to 6% of the mortgage amount. Let’s break it down with an example. Suppose you borrow $250,000 at 6.5% interest on a 30-year loan. Your monthly payment would be around $1,580. If your closing costs are on the higher end—say $15,000—and you roll them into your mortgage, you’re now borrowing $265,000 instead of $250,000. This increases your monthly payment by $95, leading to an additional cost of over $34,000 over the life of the loan.

In short, closing costs matter. Being aware of them and negotiating where possible is crucial.

Negotiable Closing Costs

Some closing costs come with wiggle room, meaning you can negotiate them down. Here are a few:

Homeowners Insurance: Your lender requires this, but you can shop around for the best rates. Don’t assume the insurer suggested by your lender or agent is the best option.
Origination Fee: This fee typically covers the cost of underwriting the loan and is usually about 1% of the loan amount. Always ask to have it waived or lowered; you might not succeed, but asking costs nothing.
Underwriting Fee: Some lenders charge this fee in addition to or instead of the origination fee. Again, you can negotiate this.
Loan Application Fee: This one-time fee for processing your loan can also be a candidate for negotiation, especially if you’re already paying an origination or underwriting fee.
Real Estate Commissions: Traditionally, sellers have paid the commissions for both the seller’s and buyer’s agents. However, recent changes in the real estate industry mean buyers may now be asked to contribute. It’s another area to negotiate.
Title Insurance: You’ll need to buy lender’s title insurance, which only protects the lender. You can shop around for better rates and suggest a different insurer to your lender. Don’t forget to purchase owner’s title insurance to protect your ownership.

Non-Negotiable Closing Costs

While some closing costs can be negotiated, others are fixed. These include the appraisal fee, credit check fee, government fees (such as title transfers or recording costs), and property taxes. You should be prepared to pay these costs without expecting any leeway.

The Importance of Integrity in Your Mortgage Company

With so much money on the line, it's essential to work with a mortgage company that operates with transparency and integrity. Movement Mortgage is a Christian mortgage company founded during the 2008 housing crisis. Its mission is to help homebuyers while glorifying God by positively impacting communities within the U.S. and abroad.

Movement Mortgage offers competitive rates and the opportunity to be part of a global movement of change. The company has donated $377 million to community projects both locally and internationally. With locations in all 50 states, Movement Mortgage is a lender you can trust to guide you through the home-buying process with integrity.

For more information, you can visit FaithFi.com/Movement.

On Today’s Program, Rob Answers Listener Questions:

Are permanent endowments biblical in a Christian context? I'm thinking of a Christian university, nonprofit, or other Christian organization with a permanent endowment where the original gift can never be touched and only the income can be used. What are your thoughts on the biblical perspective of this?
I had a TIAA account that my husband took out as an adjunct professor at the local community college. It's just a small amount, and because I'm 76, I've been required to take a certain amount out each year. I want to give this to my son so those amounts can stay there and start accruing interest. Can I do that?
I'm trying to mitigate the taxes on the sale of a rental house. Can I use the proceeds to satisfy my required minimum distribution (RMD), or does the RMD have to come from an IRA? Also, my husband has had a whole life insurance policy since he was 20. Is there ever a time when whole life insurance is beneficial?

Resources Mentioned:

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