When it comes to real estate transactions, one of the most common questions asked by buyers and sellers is, “What are closing costs?” and “Who pays the closing costs?” Closing costs is the collective term referring to all the fees and charges that the buyer and the seller are responsible for at the closing, or settlement, of a home purchase. Generally, the buyer pays for most of the closing costs, but they may negotiate with the seller to pay for some or all of the costs. The fees and legal requirements vary per state and municipality, so it would benefit a homebuyer to work with a qualified and experienced real estate professional who would provide them with all the information and guidance that will enable them to get the best deal out of their real estate transaction.
Average Closing Costs in Twin Cities, MN
The buyer closing costs in Twin Cities, Minnesota would typically range from 2% to 4% of the home purchase price. These costs are not set in stone, so a buyer can ask the seller to pay for their closing costs and, usually, sellers would agree to pay up to 3% of the purchase price towards the buyer’s closing costs.
For sellers, closing costs are generally between 1% to 3% of the home price. So, for example, given the median sales price of Minnesota homes (as of August 2019) of $235,500, a seller’s closing costs would range from $2,355 to $7,065. In addition to this, sellers would also have to pay for commissions, which is typically 6% of the home price. This would translate to approximately $14,130 in commissions.
Typical Closing Costs for Homebuyers and Sellers in the Twin Cities, MN
- Survey Fee
- Appraisal Fee
- Origination Fee
- Recording Fees
- Title Search Fee
- Prepaid Interest
- Home Inspection
- Underwriting Fee
- Credit Report Fee
- Lender’s Title Insurance
- Settlement/Escrow Fees
- Escrow Fees
- Transfer Fees
- Attorney Fees
- Recording Fees
- Title Insurance for the Buyer
- Mortgage Payoff and Any Penalty Fees for Prepayment
- Other Amounts Owed (HOA Fees, Property Taxes, Utilities)
Tips for Lowering Closing Costs of Twin Cities Homebuyers
The list of fees and charges related to closing can be overwhelming, especially if you are a first time homebuyer. Keep in mind, though, that these closing costs are not set in stone. You can negotiate with the seller to shoulder some or all of these costs and also find other ways to reduce these. Below you’ll find some helpful tips:
1. Shop Around for Services
It is common practice for homebuyers to shop around for mortgage rates, but did you know that this is not the only closing cost that you can shop for? Yes, aside from mortgage rates, you can also shop around for title insurance and pest inspection fees. It will benefit you to read through the details on your Loan Estimate as this will show you what other services you can shop for and which ones you can’t so you can lower your overall closing costs.
2. Check Which Fees Can Be Changed
It is important for you to know that not all of the fees listed on your Loan Estimate are fixed. In fact, some of these can be changed to your advantage. For instance, if you would be using a company that has been recommended by your lender, certain fees like your title services, lender’s title insurance, and owner’s title insurance cannot go up by more than 10% at settlement. On the other hand, if you decide to use other service providers which are not listed in the Loan Estimate, the costs could be much higher/
3. Inquire About Discount Points
While it is common practice for homebuyers to pay discount points in order to get a lower interest rate, some experts would advise not to do this when current mortgage rates are low, unless the buyer plans to keep the property for the long term. So, if you would like to know whether it will be to your advantage to buy points or not, ask your lender.
4. Check and Compare Third Party Rates
Although closing costs vary in each state and municipality, generally, most third-party fees are fairly comparable. It would be good to compare rates and, if you notice third-party estimates that are too high or too low compared to the average, ask the lender to discuss these with you first before you decide to use them as your lender or title insurance provider.
5. Schedule Your Closing Date at or Near the End of the Month
This is the easiest way for you to lower your overall closing costs. By setting your closing date at or near the end of the calendar month, you can actually save on prepaid interest. This is because this particular cost accrues from your closing or settlement date to the end of the month. So, by choosing a date that is closer towards the end of the month, you are getting a lower prepaid rate, since there are fewer days in between these dates. For example, if you have set the closing date on the 1st of the month, you will have to pay for 30 days of interest; whereas scheduling the closing date on the 30th would only cost you a day’s interest.
If you are in the market to buy a home in the Twin Cities, I will be very happy to show you all your best options in this area. Feel free to give me a call at 612-968-2161 or send me an email at Jesse@GrumdahlGroup.com to schedule an appointment.
