In many circles on to be considered while the most important investments in individual make in their lifetime. There are many reasons why a home is such a great investment. One of these reasons is that they each come with a high purchasing price and carry their value. Homes are such a solid commodity, they tend to historically increase in value over time, and not depreciate like many items consumers purchase. For the same reason that a home is a great investment, its high cost and historically high values makes them a very expensive investment. Homes also prove to be one of the most expensive investments an investor will make in their lifetime, and therefore most investors, or consumers will not have the needed capital to purchase a home up front. In fact, almost 90% or more of the home buyers will not have the needed funds to purchase a home using cash. Because of their lack of funds, investors will have they will need to borrow the funds from a lending institution or some other form of lender.

Again, because individuals or investors or consumers do not have the capital to purchase a home, they will take out a mortgage, or home loan from a lending institution. This lender who will be giving the buyer a loan will charge the buyer or the borrower a fee for the use of their funds. The charge for the funds will come in the form of interest. Interest is simply the fee the lender charges for the use of their money. With the understanding that home owners or buyers rarely have the needed capitol up front to buy a home, suddenly the real overall cost is a whole lot more.

There are actually many costs that are associated with taking out a large loan on as large a scale as purchasing a home or real estate. Some of the more up front and personal costs are usually associated, or are made a reality during closing process with closing costs.

When a home is closing, the associated costs with closing on the home are called “closing costs.” Closing costs are usually associated with two forms of costs: one of those being costs associated with the bank and the new loan origination. The other costs usually coming from appraisals and home inspections. Usually only in a strong buyers market will the seller offer to pay for all or some of the closing costs. With respect to the housing markets, historically the market does not belong to the buyer, but to the seller. Therefore the closing costs are usually paid for by the buyer. Closing costs may cost anywhere from two to eight percent of the cost of the entire house so one needs to prepare for the high costs of closing.

The reason closing costs are called the hidden cost of real estate is because rarely do first time buyers take into account how much will need to be spent at the time of closing in order to settle the house in the name of the buyer. It is wise for a buyer to plan on staying in their home for a number of years in order to build enough equity both from principle payments on the loan to be made and from the increase in home values.

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Category: Real Estate
Keywords: homes, real estate, buying a home, selling a home, realtor, realtors, loan, mortgage, foreclosure, s