Who pays closing costs?

On Behalf of | Jun 6, 2022 | Residential Real Estate

If you’re going to buy a house, you’re going to be responsible for some closing costs on that house. These could be as low as 2% or as high as 5%. As you can imagine, having to pay 5% on top of a expensive new home could add a financial burden that you weren’t planning on.

As a result, people sometimes wonder if there are other ways to deal with these closing costs. Do they have to pay them as the buyer? Does the seller have any closing costs that they’re going to have to deal with? Let’s take a look at some of your options.

Asking the seller to cover

If you don’t have the money for the closing costs, one option that you may want to utilize is asking the seller to cover those costs. This is difficult when the real estate market is hot and there are a lot of different offers on the table. But if you’re in a situation where the home won’t sell and they’re not looking at other offers, then you may be able to ask them to pay the closing costs and they’ll be happy to do it just to get the deal done.

For instance, this is sometimes a tactic that is used when the seller has already purchased another home. They just want to sell their old house quickly so they don’t have two mortgages, so they may be willing to work with you.

Rolling it into the loan

Another option that people sometimes use is simply to roll those closing costs into the loan that they’re taking out. Essentially, you’re agreeing to pay more money over the same term, and the money for the closing costs is then financed. This means that you do have to pay interest on it, but it also spreads your payments out over the term of the mortgage, which is probably 15 or 30 years. If closing costs are all that are preventing you from moving into a new home, you may not mind adding a small bump in monthly payment over that long.

Working through the process

These are just a few of the financial options you have, but you can see how important it is to consider them all carefully as you work through the home-buying process.