What are Closing Costs?
Once a real estate transaction in Meridian, Idaho has been finalized, the parties involved in making the sale possible will have to be compensated. These fees are called closing costs. Closing costs are payments made during the closing of a real estate transaction, when the title of a property is transferred from the seller to the buyer.
Generally, the buyer is responsible for the closing costs of the property, because most of the services are performed to satisfy the buyer’s lender, as well as to protect the buyer from issues concerning the property which are disclosed during the transaction. However, buyers may ask the seller to pay some of the closing costs during the price negotiations.
There are instances when the seller is willing to pay for a portion or all of the closing costs, depending on local market conditions and the terms of the purchase agreement. When this happens, such concession should be acknowledged in writing. The amount is then deducted from the sale proceeds, so essentially, there is no out-of-pocket costs on the side of the seller. The seller can expect to pay approximately 1% of the sale price in closing costs.
Closing costs in Idaho vary by state and by lender so it is best to shop around, if possible. It is good news for the buyer that many of the fees associated with closing costs are negotiable, such as the following:
- Credit Checks
- Application Fees
- Title Searches
- Broker Fees
- Other Processing Fees
The closing costs listed below, on the other hand, are not negotiable:
- Property Taxes
- Homeowners' Insurance
- And Private Mortgage Insurance (PMI)
The loan origination fee usually makes up a large percentage of a buyer’s closing costs, which is typically 1 percent of the mortgage. If the buyer opts to pay less than 20 percent down payment, they will also need private mortgage insurance. A one-time fee of up to 1 point is included in the private mortgage insurance (PMI), plus a specific dollar amount which is added in their monthly mortgage payment. Buyers may also pay 1 to 3 points or 1 percent to 3 percent in up-front interest.
Average Closing Costs in Idaho
Once you have found a property in Meridian, Idaho that you would like to submit an offer for, you can estimate your closing costs to range from 1 percent to 8 percent of the home you are buying. Initially, your lender will give you an estimate of your closing costs pursuant to the Real Estate Settlement Procedures Act once you have submitted your loan application. This disclosure provides the buyer with a good faith estimate of what your closing costs will be in the real estate transaction. A statement with an itemized list of actual costs will be given to you three days prior to closing.
To give you a better idea of how much your closing costs will be as early as now, we have prepared a comprehensive list of standard closing costs in the state of Idaho, showing the average amount per cost based on a loan amount of $200,000:
|AVERAGE CLOSING COSTS IN IDAHO
Based on $200,00 Loan Amount
|Itemized Origination Fees Charged by the Lender|
|Broker, Originator or Lender||$811
|Itemized Third Party Fees
|Attorney, Closing or Settlement||$451
|Total Origination Fees Charged By Lenders||$951|
|Total Third Party Fees||$1,073|
|TOTAL CLOSING COSTS||
Breakdown of Idaho Closing Costs
- Loan Origination or Lender Fees
- Loan Discount
- Appraisal Fee
- Document Prep Fee
- Credit Report Fee
- Lender Fees
- Prepaid Interest
- PMI (Private Mortgage Insurance) Premium
- Beginning of the Escrow Account
- Earnest Money Deposit
- Title Insurance
- Settlement/Closing Fee
- Miscellaneous Title Charges
- Tax Services
- Home Inspection
- Sales Commission
- Title Insurance
- Property Transfer Tax
- Property Taxes
- Title Search
- Home Warranty
- Escrow Fees
Strategies on How to Reduce Closing Costs in Meridian, Idaho
While closing costs could be a bit daunting for first time residential property buyers in Idaho, always keep in mind that these expenses are not set in stone. A lot of the costs can be negotiated to your advantage, and there are a few strategies you can apply so that you can get a much better deal in the end. Here are some of the things you can do to reduce your closing costs:
1. Get Quotes from at Least Three Lenders
The biggest mistake a buyer can make is to go with the first lender that you call. Needless to say, it is best to shop around because, chances are, there might be a better deal out there. It is recommended to get multiple quotes from at least three lenders. Assess each one and go for the one that offers best total package, which includes the lowest interest rate and closing costs.
2. Request for a GFE Form and Compare the Costs
Lenders do not necessarily follow a specific list, meaning, they may call the same fees by different names, or group together certain costs while others may list these separately. For first time buyers, this can cause a lot of confusion and make it more challenging to evaluate one lender’s quote from another’s. The best way to go about this is to request for a Good Faith Estimate (GFE) form, which lists every individual fee. This way, you’re comparing apples to apples, making it much easier for you to assess your options.
3. Ask Everything to Be Explained to You
As mentioned earlier, there are negotiable closing costs and there are those that are set in stone. You want to know which ones you can lower and by how much, so ask the lender to walk you through each expense and explain what it includes. While some third party charges, such as appraisals and credit report fees, are non-negotiable, other costs are more flexible, such as title insurance, legal fees, and rate lock fees. A lender may also charge negotiable fees, such as application fees, underwriting fees, and loan processing fees, that they can take out if you ask them to. So, if there are certain fees that seem vague, it wouldn’t hurt to ask the lender to take these out of your closing costs.
4. Get the Lenders to Compete Against Each Other
One way to get the best deal is to pit the lenders against each other. Instead of just comparing one deal with the other, you can let the other lenders know of the offer that was given to you and ask them if they can match this. And knowing how competitive the market is, it is very likely that the revised offers you will be receiving will be much better.
If you need an accurate estimate of the closing costs you may incur in buying a property in Meridian, Idaho, we're here to help. Please call us at 208-917-8022 or you may fill out our contact form below and we will get back to you the soonest possible time.