Are closing costs unavoidable?

Closing costs for a mortgage or refinance loan are sometimes offered as an incentive in real estate transactions, but could they make or break a deal?

Admittedly, closing costs can add up. Homebuyers might pay between two and five percent of a home’€™s purchase price in closing costs, if not more. Such costs may include fees for third-party services such as appraisals and credit reports, or simply fees charged by the lenders themselves.

Of course, there are also other costs that may be included in the mortgage price, rather than counted as closing costs. Such costs may include title search and insurance fees, association fees, and interest or other prepaid items. Nevertheless, an attorney that focuses on real estate transactions, including buying and selling real property, may have strategies to suggest for trimming closing costs.

One strategy for prospective homebuyers might be investigating some of the approximately 2,000 down payment assistance programs in the United States. Such programs might help prospective homebuyers to reduce their closing costs. This might be accomplished by taking out a subordinate loan to the primary mortgage. Depending on the program, payments on that subordinate loan might be deferred or even forgiven.

Most programs impose limits on household income and sale price, with the average limits being $104,000 and $823,000, respectively. Yet a recent survey suggests that 86 percent of American single-family homes and condos would still qualify under those restraints. It’€™s a shame that more homebuyers aren’t taking advantage of such assistance. Our law office can answer questions about these programs and guide clients through a wide range of residential or commercial real estate matters.

Source: Market Watch, “The little-known way to buy a home with almost no cash down,”€ Daniel Goldstein, Feb. 5, 2015