Years of low interest rates and low housing supply have made housing markets across the country red hot. People are going to greater lengths than ever to close on home purchases, and new listings disappear quickly.
Part of successful home buying and knowing what to expect. Sellers want to close fast, and they will often go with experienced agents and buyers who know what they’re doing, even if it means leaving a few thousand dollars on the table.
They just don’t want to go through all of the efforts only to have a deal fall through. Relisting a property can push away buyers who might question whether something’s wrong.
To make yourself as attractive a buyer as possible, you should know what the costs of buying a home are, how long things generally take, and what counts as normal negotiations in this kind of market.
In many cases, closing costs are used in negotiations on home purchases.
On average, you can expect to pay between $3,000 and $4,000 in closing costs in South Carolina. That will include all of the fees your loan processor will charge to process and record the purchase.
There are ways to reduce your closing costs and even get the seller to pay for them, though that may not be the best option for a lot of buyers. Let’s break down what you can expect to pay and how you can save money on closing costs.
The Closing Costs Breakdown
There are a lot of different fees that make up closing costs. Too often, we hear about thousands of dollars and simply lump closing costs into one.
However, knowing exactly how much you’re paying is the best way to save you money and speed up your closing.
Don’t let the hundreds of dollars get lost in the thousands. Chipping away at closing costs is still real money!
As a home buyer, you should know how much you’re paying and whether every fee that’s charged to you is absolutely necessary. In general, here is what you can expect to pay:
The title company that handles your closing will typically charge several fees that have to do with checking to make sure your title is clear.
Have a clear title and paying off all of the existing liens on the title is important to smooth ownership transition. They’ll look for any claims on the title from banks to make sure no one can challenge your purchase of the home.
These aren’t expensive, but your closing company will charge you a fee to record the sale with the local government authorities. It makes things official and updates your name on the deed.
Appraisals are paid either out of pocket before closing or they’re lumped into the closing costs. How your lender usually handles appraisals will dictate which route you go.
You can expect to pay anywhere from a few hundred dollars for an appraisal to around $500 depending on the type of property and the size of the home.
One way lenders make money is by charging fees in closing costs. These are also sometimes called origination fees.
Sometimes lenders will charge you percentage points (or points) on your total loan amount as a way to get you a lower interest rate for the life of your loan.
You should do a long-term cost analysis of whether paying down for a lower interest rate is worth it. If you’re staying in the property for several years, then it may be worth the upfront costs.
However, if you’re only going to be there five years, it may cost you more money than you would make back in monthly savings.
Credit Report Fees
Lenders who take applications need to pull your credit report to see if you can qualify for a loan and what type of interest rate they can offer you.
That credit check doesn’t come free, unfortunately. The good thing is that credit report fees are usually $40 or less.
Depending on the transaction, an attorney fee could be part of your closing costs. Some title companies hire lawyers to look over the paperwork and handle any discrepancies that could be a challenge to a smooth closing.
If you’re going to include your monthly property taxes and insurance in your payment, a big chunk of your closing costs will be to start up those funds.
You’ll need to make a large deposit into your escrow, generally to fund the first few months of payments.
In addition to the title fees you’ll pay, most loans also require title insurance to pay for any issues related to your title that come up after the loan is filed and the transaction is recorded.
These are just some of the fees that you can expect to pay for closing.
In every real estate transaction, the fees will vary because different lenders charge different amounts for things. Some will charge you a documents preparation fee, a processing fee, and courier fee, and others.
Ways to Save Money on Closing Costs in SC
It’s a hot market, so home buyers are stretching budgets and scraping out their change jars to make deals happen.
In this environment, it can be tough to make demands to sellers. You’re going to have a hard time asking for the seller to cover a new roof in this market.
However, you can still negotiate on closing costs with your lender to shave off hundreds and even thousands of dollars. Here are some things you can try to save some money on your closing costs.
Go through the fees with your lender – When you get your initial loan summary, or Good Faith Estimate (GFE), from your lender, look it over and read each itemized fee on the loan sheet. Circle anything you don’t understand and bring it up with your lender.
Ask them if there is any way some of them can be taken off. For example, many homebuyers don’t know that lenders make money on the interest rate yield spread when they sell your loan to a bank.
In many cases, buyers just assume that if it’s on the list, they have to pay. Don’t be afraid to bring it up and see if some of the fees can be taken off.
Asking the Seller to Pay for Closing Costs – This sounds great, but it’s probably not what you think.
Getting a seller to pay for closing costs is harder these days because, rather than deal with your asks, the seller can just go with the next person in line who doesn’t want anything other than the house.
Additionally, when you ask a seller to cover closing costs, it’s not like they break out their checkbook and write you a check for $3-4,000.
Instead, they raise the price of the house by that much (including how it will impact the fees, etc.) and then pay for the closing costs out of pocket so you don’t have to.
It’s a decent solution for people on a budget who don’t have the thousands required to pay for closing costs and make the down payment requirements at the same time.
Just don’t fool yourself into thinking that the seller is actually paying for them. It’s just an effective workaround under certain circumstances.
The Final Word
Closing costs in South Carolina are lower than in many other states. Still, they’re going to add thousands of dollars to your final bill on any real estate transaction.
Knowing your way around closing costs can save you real money and make you a more attractive buyer in a hot real estate market.