If you’re purchasing a home in Stockton or anywhere in the state of California, you may want to speak with a mortgage broker to finance it. And, at closing, you’ll be required to pay closing costs associated with that mortgage. These can vary depending upon the lender, the loan type, what fees need to be paid to outside parties and even what time of the month the closing takes place.
What Exactly Are Closing Costs?
Closing costs are simply the fees that are associated with obtaining a mortgage that are paid at closing. These can be one-time charges at closing. They can also be prorated or recurring charges that will become part of your monthly payment.
Examples of these closing costs are:
- Loan origination fee
- Discount points
- Lender’s fees
- Appraisal fee
- Credit report
- Tax service
- Recording fees
- Transfer taxes
- Home inspection
- Termite inspection
- Escrow fees
- Document preparation fees
- Wire fees
- Owner’s title policy
- Lender’s title policy
- HOA fees
- Prorated property taxes
- Prorated property insurance
- Prorated interest until the first payment
Some of the fees are charged by the lender for services, some are charged for escrows that they will hold (such as insurance and taxes) until payment is due and some are charged by the closing agent.
Wow! That’s a Lot of Fees!
And they are not all consistent. Closing fees will depend on the lender and who they use as their closing agent. Some lenders charge underwriting and processing fees, others don’t. Some will charge discount points for a lower interest rate. And then there are those prepaid charges that you will pay regardless of the lender such as your prorated share of property taxes, your first homeowners’ insurance escrow payment and interest on the loan until that first monthly payment.
So Back to the Main Question: Can I Reduce These Closing Costs?
Unfortunately, closing costs are a fact of life if you need a mortgage here in California. You can shop for lenders who charge a few less fees but, for the most part, closing costs are just part of getting mortgage financing.
Seller or Interested Party Contributions
For a new home purchase, you may be able to get a seller to contribute toward closing costs. The rules vary depending on the type of mortgage you are getting, whether that home will be your primary residence and the amount of downpayment you are offering. This can be negotiated with the seller.
A conventional loan allows seller contributions of between 2 percent and 9 percent depending on those variables. FHA loans allow sellers or other interested parties to contribute up to 6 percent of closing costs. VA loans will allow a seller to contribute up to 4 percent of the purchase price plus the reasonable and customary closing costs of the mortgage. But this 4 percent only applies to specific costs such as
- Prepayment of taxes and insurance
- Payment of the VA funding fee
- Any appliances or gifts from a builder
- Any discount point in excess of 2 percent of the loan
- Paying off any judgments or debts of the borrower
Get Professional Help
The best way to understand closing costs and what your options are is to speak with a mortgage professional who understands and works with different lenders and types of home loans. Working with a qualified California mortgage broker can give you many options that you would not normally be aware of when it comes to mortgage terms, rates and closing costs.
At H.O.M.E. Lending, we offer expert loan advice every step of the way. Getting a mortgage is a huge undertaking. We service Stockton and the entire state of California. Let us make your mortgage financing as stress-free as possible. Call us today at (209) 477-0262 to speak to one of our knowledgeable mortgage professionals.