Closing Costs…Who Pays?

As a Naperville Mortgage Lender, we are often questioned about how much money does a Borrower need in savings to cover Closing Costs on a typical purchase of a new home. As a Naperville Mortgage Lender, I always tell my clients that there are “3 Buckets Of Cash Needed At Closing” with every purchase transaction:

1. Down Payment – Bucket #1
2. Closing Costs – Bucket #2
3. Prepaids/Escrows – Bucket #3

Let’s talk about Bucket #2: Closing Costs, and who pays for it. Closing costs are non-recurring costs that are charged by third party vendors (appraiser, title company, attorney, etc.) and non-recurring costs that are charged by the Lender (processing fee, underwriting fee, prepaid interest), as well as having the Buyer initialize or deposit funds into their escrows (deposits) for real estate taxes and homeowner’s hazard insurance.

Depending on how quickly the Seller wants to sell, you will typically have three options for paying closing costs that are assessed at the closing:

1. You can pay the closing costs yourself
2. The Seller can pay the closing costs through negotiations
3. If you qualify for a down payment assistance program, such as IHDA (Illinois Housing Development Authority), they can pay

Under Option #1: you can pay the closing costs – if you have the funds in the Bank and the payment will not produce a financial hardship on you, you will get a competitive interest rate based on your credit score and loan balance.

Under Option #2: the Seller can pay the closing costs – if the house has been on the market for a longer period of time, the Seller may be motivated to pay for your closing costs. Your real estate professional will work with the professionals representing the Seller and see if the Seller is willing pay some of your closing costs.

Under Option #3: you qualify for a down payment assistance program – some programs offer up to $10,000 towards down payments. In this case, you will be charged a slightly higher interest rate but won’t have to pay out of pocket money for closing costs.

If you have any questions regarding the home buying process and how your Naperville Mortgage Lender can qualify you to buy a home for 1% of the purchase price or help you determine the best option to pay for your closing costs on the purchase of your dream home, don’t hesitate to contact your Naperville Mortgage Loan Officer by. clicking here.

We will talk about Bucket #3 – Escrows and ‘who pays them’ in our next Blog..

* for DuPage county and collar counties. Could be more or less in other counties.

Contact
The Marino Lending Team

Glen Marino
630.788.7859 (Mobile) | 630.983.3604 (Office)
Email: G.Marino@goFCM.com
NMLS ID #209516 | License: IL #031.0002979

Tony Marino
847.804.1059 (Mobile) | 630.806.2870 (Office)
Email: T.Marino@goFCM.com
NMLS ID #244399 | License: IL #031.0037907

Tanya Reyes
815.757.6944 (Mobile) | 630.947.0562 (Office)
Email: T.Reyes@goFCM.com
NMLS ID #1542842 | License: IL #031.0045066

651 N. Washington Street
Naperville, IL 60563