As a first-time home buyer, you may not know that you have to pay a considerable amount that is usually required at closing. Processing fees, insurance and interest can be included along with a number of other miscellaneous charges that are not part of the actual price of the home. Normally, your realtor should inform you that closing costs could be around two percent of the total purchase price. It may even cost as much as three percent, depending upon the contract you have with the seller.

To be prepared for closing request a good faith estimate (GFE) once your application is in. Legally, lenders must tell you what they estimate closing costs will be, along with your annual percentage rate (APR) within three days of your applications submission. Subsequent negotiations and adjustments will probably alter the cost slightly after the first application, but you still have a right to know how much it will cost.

First Time Home Buyers May Have Fewer Options

Most lenders have at least a few different options for fee payment. Some institutions offer a "no cost" loan that allows you to purchase a home with little or no out-of-pocket cost, which is attractive to first-time buyers. Be warned that you will have a higher interest rate than the average mortgage borrower. Sometimes you also have the option to put more money down through buying points and therefore lower your interest rate. Shopping around for a better rate is ideal if you have the time, but many first-time home buyers are more concerned with coming up with closing costs. Discussing options in detail with your lender will provide you with the most valuable information.

Inform Yourself of the Purchase Process

Lenders typically charge a one percent origination fee plus a processing fee. This processing fee can range from a few hundred to thousands of dollars. If you are using a mortgage broker, there will also be bank fees. Some of these bank fees will be items like an underwriting fee or a "doc prep" fee, and usually runs between $600 and $995. When your lender gives you a GFE, it will have title fees and appraisal costs listed as well. Many of these fees will vary directly depending on the loan amount, and are usually between $1,000 and $2,000. An appraisal fee starts at $350. With the amount of varying factors at play when purchasing a home, getting a GFE from your loan officer is requisite to the process.

Escrow Includes Tax, Prepaid Interest and Insurance Payments

Financing fees are only one part of the costs of closing. To make sure you get funding for your home purchase, you will have to have proof of insurance as well as one year's worth of insurance premiums. In this way you will have secured your investment along with the banks. Tax on your new home and any prorated interest will be tacked onto the closing costs.

Just to reiterate, make sure that you are on top of all the closing costs, so that there won't be any embarrassing surprises at the closing.

Check out our Gilbert Arizona Luxury Houses on MLS