What are Closing Costs?
Closing costs is a collective term for all the fees and charges that are paid by the buyer and the seller at the end of a real estate transaction. Generally, the buyer shoulders most of the closing costs, but there are instances when the seller agrees to pay for some of the fees. The fees and legal requirements involved in closing vary for each state and municipality, and it is best for homebuyers to work with a qualified, experienced real estate expert so that they are able to get the best deal from their home purchase.
Average Closing Costs in Salem, OR
On average, homebuyers in Oregon pay around 2% to 5% of the purchase price in closing costs. The key factors in determining a homebuyer’s closing costs are:
- Loan Program
- Credit Scores
- Down Payment
- Property Type
Once a homebuyer applies for a mortgage loan, the lender hands them a document known as a Loan Estimate. This standardized, three-page document contains a lot of important information about the loan, including the loan amount, mortgage rate, and estimated monthly payments, as well as an estimate of the homebuyer’s total closing costs. This document also provides an itemized breakdown of the various costs associated with the homebuyer’s loan. Luckily for Salem homebuyers, the state of Oregon does not impose real estate transfer taxes, unlike many other states.
Breakdown of Homebuyers Closing Costs in Salem, ORHomebuyers in Salem, Oregon typically pay for the following lender closing costs at close of escrow:
- Loan Origination Fees
- Credit Report Fees
- Flood Determination Fees
- Tax Service Fees
- Administration Fees
- Lender’s Title Insurance Policy
- Prepaid Insurance
- Prepaid Taxes
- Prepaid Interest
- Lender’s Title Insurance
- Mailing Services
- Closing fees
- Document Service Fees
- Wire Transfer Fees
- Recording Services
How Can Homebuyer lower their Closing Costs in Salem, OR?
Going over the list of closing costs can be very overwhelming, especially for first time homebuyers. It may seem that the list is endless and having to learn all the various terms can deter homebuyers from investing time on this. However, keep in mind that with the right real estate professional by your side, all this will not be as difficult as it may seem. Also, investing time to learn about these fees and charges makes it possible for you to plan the best way to negotiate with all the parties involved and consequently reduce your overall closing costs.
1. Look for a Brokerage Firm That Offers a Rebate on the Broker’s Commission
It is common practice for homebuyers to negotiate with their broker to lower their fees, but there is one more thing you can do to further reduce this. You can ask your brokerage firm to give you a rebate on their commission and, in return, you can do some of the legwork yourself. Some of the things that you can do without the help of a broker include checking property listings, watching virtual tours, and attending open houses.
2. Familiarize Yourself with the Fees and Charges in Your Closing Costs List
It pays to know what fees and charges are included in your list of closing costs. Investing time in learning what these are is key to getting the best deal out of your home purchase transaction. You can research about these yourself, as a lot of reliable information are now easily accessible online. However, it is best to work with your real estate partner so you can be given proper guidance.
3. Consider Purchasing a Resale House Instead of a Brand-New Home
Although a lot of homebuyers prefer to buy new construction over resale homes, it may be more practical to consider buying the latter. Brand-new houses would usually cost more and, consequently, have higher closing costs. A resale home, on the other hand, may be a more practical option. Even if a resale property may need some updating and repairs, the overall costs may still be lower compared to the costs involved in buying a new house.
4. Shop Around and Get Quotes from Multiple Lenders
According to a recent study, homebuyers can potentially save as much as $1,500 by getting a second quote and at least $3,000 by shopping around and getting quotes from five different lenders. It is to your best interest to invest time and effort in shopping around for lenders. By doing so, you can save around one-eighth percent to a half-percent on your loan. While these percentages seem small, these can translate to significant annual savings. For example, if you compute for the half-percent of a $500,000 loan, this would be $2,500 that you can save on a yearly basis.
5. Schedule Your Closing Date Close to the End of the Month
Another practical strategy that can help you further reduce your closing costs is to set your settlement date towards the end of the month. Doing this lowers your prepaid daily insurance charges, as this decreases the total number of days between the settlement date and the start of the next month. So, in effect, your prepaid or “per diem” interest becomes lower. To compute for your savings, start by multiplying your loan amount by the interest rate then divide the result by 365 to determine your daily interest charge. Next, multiply that amount by the number of days that are left in the month. The result will be the amount that you will have to pay at your closing meeting.
Are in search of the perfect home in Salem, OR for you and your family? I will be very happy to help you. Feel free to give me a call at 503.932.8639 or send me an email at email@example.com to schedule a meeting!