What are Buyer’s Closing Costs? Who Pays?

What are the Buyer's costs?

Buyers and Seller's of property both have what is termed " customary costs " incurred for the transaction.  The buyer's customary costs are a  50/50 split of the escrow fee, (except for the portion required to be paid by the seller in an FHA or VA transaction ), prorated taxes, HOA dues if applicable, pre-paid interest and insurance premiums.  Additionally,  buyer's costs also include Loan fees, appraisal charges and title insurance costs for the lender.   These costs combined are what make up the buyer's closing costs and can add up to 3.0% - 3.5% of the purchase price for an FHA, VA or USDA loan or other special program loan.    ( Ex: up to $ 7500.00  on a $200,000.00 purchase ).  Buyer closing costs are generally lower when using a Conventional Loan and lowest for a cash purchase.

Who Should Pay?

Buyer's closing costs are just that, the buyer's costs.  In contrast, it has become almost a custom in our northwest area market for an offer to purchase to include a request for the seller to contribute funds to the buyer's costs to close.   In some cases the seller will include an offer to pay some of the buyer's closing costs pre-calculated into the listing price.    When making an offer to purchase that includes a request for buyer closing costs, keep in mind that the seller has closing costs as well ( see What are Seller's Closing Costs? on this Blog ) and work with your Realtor to structure an offer that can be accepted by the seller.   At times the price of the property may need to be raised to accommodate the buyer's costs.

Are There Advantages to Paying My Own Closing Costs?

Yes, for many buyers, closing costs are a deduction on your tax return.  If you have funds to close, it may be to your advantage to pay at least some or all of your own closing costs and negotiate a lower price for the property.   Seller's are more willing or able to accept a lower selling price if the offer does not include a seller contribution to buyer closing costs.

Are You Eligible for a VA Loan?

Almost 30 million veterans and service personnel are eligible for VA financing. Even though many of that 30 million have already used their loan benefits, it may be possible for them to buy homes again with VA financing using remaining or restored loan entitlement.

• Veterans with active duty service, that was not dishonorable, during World War II and later periods are eligible for VA loan benefits.


• World War II (September 16, 1940 to July 25, 1947)


• Korean conflict (June 27, 1950 to January 31, 1955)


• Vietnam era (August 5, 1964 to May 7, 1975) veterans must have at least 90 days’ service.


• Veterans with service only during peacetime periods and active duty military personnel must have had more than 180 days’ active service.


• Veterans of enlisted service which began after September 7, 1980, or officers with service beginning after October 16, 1981, must in most cases have served at least 2 years.


• Persian Gulf Conflict—Generally, reservists and National Guard members who were activated on or after August 2, 1990, served at least 90 days and were discharged are eligible.


• Selective Reserve—Members of the Selected Reserve, including National Guard, who are not otherwise eligible and who have completed 6 years of service and have been honorably discharged or have completed 6 years of service and are still serving may be eligible. Expanded eligibility for Reserves and National Guard individuals will expire October 28, 1999. Contact the local VA office to find out what is needed to establish eligibility. Reservists will pay a slightly higher funding fee than regular veterans.


• Information contributed by Shane McGraw of Legacy Group Lending.

Shane McGraw, veteran and VA loan specialist is happy to answer your questions about VA eligibility and your personal VA loan program.   Give him a call.. he does the rest.   Phone contacts: 360 698 6471  or 360 698 6440  Email:  ShaneM@LegacyG.com

2010 - Not your Grandfather's Real Estate Market !

Welcome to 2010 and the best home buyer's opportunity we are likely to see in your lifetime and mine.  Thanks to the information age we have been flooded with advice both good and not so good.  Consider this:

• Despite rumors to the contrary, banks and mortgage companies are open for business and are  lending money to qualified buyers.  Although lending guidelines have tightened,  loans are being funded in record numbers.  Lenders are hiring more workers to underwrite and process loans !


• Zero and low down financing programs are available.


• Home prices are much lower. Mortgage interest rates are at historic lows which should put a  smile on your face and give you bragging rights at social events for the rest of your life.


• First time buyers in particular can jump in the shallow water now  and ride the wave upward.


• Experts recently estimated ( and announced on K5 News ) we will see a 30 - 40% increase in property values by 2014 here in the Pierce, Kitsap, King County region.