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Chad Widtfeldt Shares Insights Into the Ultimate Guide to Understanding Closing Costs

Congratulations! You’ve found your dream home, and your offer has been accepted. But before you can move in and celebrate, there’s one more hurdle to jump: closing costs.

Chad Widtfeldt understands that closing costs are the fees and charges associated with finalizing a real estate transaction. They can add up to a significant amount of money, often ranging from 3% to 6% of the purchase price of your home.  That means on a $200,000 house, closing costs could cost between $6,000 and $12,000.

While it can seem overwhelming, understanding what closing costs are and how they’re calculated is an important step in the home-buying process. This guide will break down everything you need to know about closing costs, including:

  • What are closing costs?
  • Typical closing costs
  • How to estimate closing costs
  • Ways to save on closing costs
  • What are Closing Costs?

Closing costs encompass a variety of fees paid by both the buyer and seller to finalize the sale of a property. These fees can be broadly categorized into the following:

  • Loan origination fees: Charged by the lender to process your mortgage application
  • Underwriting fees: To assess your creditworthiness and risk as a borrower
  • Third-party fees: Appraisals, title searches, inspections, and flood certification
  • Taxes: Prorated property taxes and any relevant government recording fees
  • Escrow fees: A neutral third-party service that holds onto paperwork and funds until closing
  • Homeowners insurance: Typically one year’s premium paid into escrow at closing

Typical Closing Costs

Chad Widtfeldt explains that the specific closing costs you’ll incur will vary depending on your location, loan type, and the terms you negotiate with your lender and seller. However, some of the most common closing costs include:

  • Origination fee: 1% to 1% of the loan amount
  • Loan application fee: $100 to $600
  • Underwriting fee: $200 to $1,000
  • Appraisal fee: $300 to $500
  • Title search fee: $250 to $500
  • Escrow fee: $200 to $400
  • Homeowners insurance: Varies depending on coverage

How to Estimate Closing Costs

There are a few ways to estimate your closing costs. First, you can ask your lender for a Loan Estimate (LE). This document is required by federal law and will detail the estimated closing costs associated with your specific loan scenario.

Additionally, many online mortgage calculators can provide you with a rough estimate of closing costs based on your loan amount and location.

Ways to Save on Closing Costs

While closing costs are a significant expense, there are ways to save money:

  • Shop around for lenders: Compare loan estimates from different lenders to find the one with the most competitive closing costs.
  • Negotiate closing costs: Some closing costs, such as origination fees, may be negotiable with your lender.
  • Ask the seller to cover some closing costs: Depending on the market conditions, you may be able to ask the seller to contribute towards some of your closing costs.

Chad Widtfeldt notes that understanding closing costs and following these tips can help you better prepare for the financial realities of buying a home.

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