“What are the closing costs?”
“Why do I have to pay closing costs?”
“If you’re offering a hundred percent financing loan product, why am I paying a closing cost?”
“What does it cover?”
We want to go over that a little bit with you in this blog post to help you understand closing costs.
Understanding Closing Costs
We get these questions a lot and it’s not just with our VA buyers, but with all of our buyers, more so our first-time buyers.
Closing costs can vary and obviously, the price of your house is one of the big factors. Your lender, your lender’s fees, the title company that you’re using, the type of survey that you get.
There’s just so many inspections and things that go into those closing costs and what you’re having to pay for and every loan has it. We have buyers that say “oh no, I’m VA. It’s 100%”.
Your loan is, but not your closing costs. There are always going to be closing costs. There are ways around you not having to pay out of your pocket directly and not everybody has, what on average is about $4,500 typically?
That is just the closing costs not counting down payment. There are ways that we can help with getting that closing cost even lower…soften the blow, so to speak.
It is pro-rated taxes, interest, and insurance. So it’s your escrows, it’s prepaid.
Example of Closing Costs
Let’s say you’re closing’s today and it’s September 9th, when you pay your closing costs, what you’re paying are pro-rated taxes, interest, and fees throughout the balance of the calendar year.
What that’s covering is all of those fees, you’re prepaying your taxes, you’re prepaying your insurance, and you’re prepaying a little bit of that interest for your first two payments. And basically, what that does is every time you make payment thereafter, you are putting it in the cookie jar, so to speak, for next year because taxes are due at the first of every year.
Depending on the time of year, sometimes your closing costs are a little bit more because if you’re closing in December, you’re going to pay all of next year’s calendar year in addition to your December fees because otherwise, they’re going to run out of them before you even get your first statement.
Closing costs are not something that the seller gets, and a lot of people are like “hey, why do I have to have closing costs?”. Well, we have our own closing costs too. It costs us to do clean title searching and all those other things. So titling the house to you, recording the house to you, all your lender’s fees, all of those are tied into your closing costs and it varies.
Shop Different Lenders
We have some amazing lenders that we use on a daily basis that are preferred, which will also soften that blow by giving some discounts and incentives off of their specific fees.
With that being said, those fees won’t take care of any of your prepaid escrows, so they can’t touch those, those are the buyer’s responsibility. But again, if you come in, sit down and discuss your situation, Shelly and Holli can work out a game plan that will help you have the most money in your pocket when you close in the least out of pocket.
Here is a story that we recently were faced with:
Shelly Willis, one-half of our Cannon Builders Dream Team was helping a lady on the phone and the lady says “oh, I’ve already gotten approved with a lender”.
She proceeded to tell Shelly that she was getting a VA loan which is great and she says “yeah, but I’m a little concerned that closing cost seems a little high to me” and Shelly asks “okay, well what did they quote you?” And it was like $9,800!
That’s a RED FLAG!!!
Shelly suggests to her “you need to talk to one of our lenders”, and the lady says “oh, she spent so much time with me, she spent like 30 minutes on the phone”, and Shelly says “who cares? That’s double”.
The lady ended up actually talking to one of our preferred lenders and she was like “oh wow. I can’t believe that I was going to pay that”.
It’s always good to shop different lenders, every lender is going to do their best to get you the best numbers that they can, but it’s business.
When our buyers come in and they’re like “we’ll go ahead and call your preferred lender, but we already have a lender that we’re using” does not break our heart because at the end of the day they’re either going to meet it, beat it, or they’re not going to be able to touch it and you’re going to have the best deal.
Shop around for that lender. Make sure you are getting the best deal.
About Cannon Builders
Cannon Builders is based in Troy, MO, and serves Lincoln County and Warren County. They have 20-floor plans to choose from ranging from 1,000 to 2,277 square feet, including ranches, 1 ½-story home, and 2-story homes. Whatever your lifestyle and your budget, Cannon Builders can accommodate you. Contact them today.