First-time homebuyers surprised by closing costs

Buying a house often means saving for a long time for a down payment. And when that's done, there is a real sense of relief. But too often first-time homebuyers find out about another unexpected cost. 

Closing costs.  This is what we're talking about. 

Let's say you are buying a $200,000 house.  You can afford it. Congratulations. But you need a down payment which recent analysis shows is on average 12 percent of the loan amount. Then you find out, probably from your realtor, that you will need more money.  We talk with Ken McDaniel who owns Mortgage Funding Group.  He reminds us of closing costs and that they are, well, costly. You will be asked to be pay for quite  a few things ranging from tax reserves to attorney fees.

"Most first-time homebuyers are not aware that they're going to have to pay the 12 months insurance upfront because you're going to have to have a current policy on the date that you buy the home. Plus, you're going to have to pay three months extra for your escrow. They forget they have to pay the lender's title insurance, the owner's title insurance, the taxes," he said. 

And a few other things are rolled in there, too. That's a lot to remember so let's do some math, considering a $200,000 house price, putting down 12 percent on the loan for a down payment and considering the average three percent in closing costs. 


Now, plan on saving extra money, but when you get closer to landing on "the house," ask your realtor about how to negotiate down the closing costs, which can include asking the seller to pay some, if not all of it.