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What Exactly Are Closing Costs, and How Do I Budget for Them? · Becoming Financially Confident

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  Ralph: You found your home, you've got the mortgage lined up and the finish
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  line is in sight, but then you hear about something called closing costs.
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  Start asking yourself, what exactly are these extra fees
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  and how do I prepare for them?
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  So don't become a last minute stressful surprise.
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  Well stick with me today 'cause I'm gonna give you the tolls that you need
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  to handle this part of the process.
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  Hey there.
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  Welcome back to your Daily Financially Confident Christian.
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  I'm Ralph and it's great to be with you again.
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  This is the show that helps you answer that question, how can I become a
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  financially confident Christian?
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  And we're continuing our series dealing with the stress of money worries.
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  In the last few days, we've been talking about the home buying process,
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  and we're deep into that topic of home ownership, and that is a significant
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  financial decision for most people.
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  And if you've been following along, you're doing amazing work.
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  You've assessed your affordability, you've prepared financially, and even maybe
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  started navigating the mortgage process.
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  But today we're gonna take it a step further and we're gonna talk about a part
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  of the home buying process that often surprises people and can be a significant
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  source of stress right at the end.
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  And that's called closing costs.
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  Think about it.
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  You've saved for the down payment.
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  You've got yourself already.
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  But what about those extra fees?
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  So let's tackle that question today.
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  Don't let closing costs catch you off guard.
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  How do I understand?
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  And more importantly, how do I prepare for them?
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  Maybe you know this feeling all too well.
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  You focused intently on saving for that down payment and it took years and months
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  of struggles, which is a huge goal.
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  And then you realize there's a whole other set of expenses like
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  this down payment was enough.
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  And then you've got this, this closing cost to cover at, what
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  do we call the closing table?
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  These are things like loan origination fees, appraisal fees, title insurance.
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  There's a whole list of these things, legal fees, even prepaid
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  property taxes and insurance.
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  And the struggle here is the potential for a large, unexpected
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  financial burden, right?
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  When you thought you were finally ready, you thought you were ready to move into
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  this new home, and all of a sudden the lender says to you, Hey, but guess what?
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  Don't forget about your closing costs.
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  Not knowing what these closing costs are, how much they're gonna be, or
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  how you're gonna budget for them.
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  Let me just tell you right now.
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  That creates significant anxiety and for many people, it makes the
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  end of the home buying process feel incredibly stressful potentially.
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  And I hate to say this, even jeopardizing the purchase, if you haven't saved enough.
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  Unfortunately, I've seen deals fall through at the end because you didn't
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  have enough money for closing costs.
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  But here's the thing.
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  You need to understand this from the beginning.
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  Closing costs are normal and they're an unavoidable part of buying a home.
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  It's just part of what we have to do.
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  And being surprised by them at the last minute goes against that principle
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  of careful financial planning.
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  And as we talked about the last few days, counting the cost.
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  Remember that builder analogy from Luke chapter 14 about building
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  the tower and counting the cost.
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  That cost includes all the cost to finish the tower, not just the foundation.
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  Preparing for these closing costs is an act of diligent stewardship.
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  That's what the show is all about.
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  We need to anticipate all the necessary expenses involved in the
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  transaction to ensure that you have the resources ready to finish it.
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  It's about having foresight and managing God's resources wisely for the entire
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  process, not just the most obvious part.
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  For a lot of people, the most obvious part is, Hey, let's go shopping.
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  Let's go buy a house.
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  Oh, now we need down payment money.
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  And then you don't think about, yes, that's right, but you're also going
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  to need money for those closing costs.
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  So now you're saying, Ralph, great, you had me.
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  Now all of a sudden you're dropping something else on this.
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  How do I prevent closing costs from becoming this last
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  minute stressful surprise?
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  Well, here's what I'm gonna tell you as normal.
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  It starts with educating yourself on what closing costs typically
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  include, and you can get an estimate.
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  In fact, there's a requirement that they give you a good faith
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  estimate as to closing costs.
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  Ask the realtor to get you this information and get
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  it early in the process.
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  That way you can actively include that in your savings goal
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  along with your down payment.
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  So even when you're starting to think about, am I ready to buy a house?
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  And you're start thinking about that down payment, start thinking
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  about those closing costs as well, because that proactive approach
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  is gonna ensure you got the total funds needed, ready for closing day.
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  You're not gonna get that.
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  Call from the settlement attorney that says, oh, by the way, don't
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  forget to bring a check for $25,000 for your closing costs.
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  So here's your one action step for today, specifically designed
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  to help you understand and more importantly, prepare for closing costs.
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  I want you to start by educating yourself.
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  Learn what closing costs are.
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  Spend about 15 or 20 minutes and research common closing costs in your area.
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  Talk to a realtor, talk to a lender and say, Hey, I just don't
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  understand what this is all about.
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  Can you give me a breakdown of these things?
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  And I've said before.
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  These typically include things like loan origination fees.
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  You might heard the term called points, appraisal fees for your home title,
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  insurance attorney's fees recorded.
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  Listen, when you see a settlement sheet, there's a list of about 15 or 20 things.
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  And a lot of times the lender's gonna require you to prepay property taxes
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  maybe for even a year in advance.
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  And also your homeowner's insurance premiums.
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  They wanna make sure that you've got the resources ready so you don't default
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  on this loan right after you get it.
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  So make sure you're ready.
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  Get that early estimate.
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  So when you're seriously talking about a mortgage loan, go, you know,
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  after that pre-approval, start to look at, ask them for a loan estimate.
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  Like I said, this document's required by law and it details the estimated
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  interest rate, the monthly payment, and an estimate of all those closing costs.
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  And this is really your first concrete idea of what to expect.
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  Now, here goes into the planning part.
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  You've got to plan to include those closing costs in your savings goal.
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  Add that estimated amount as closing costs to your down payment.
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  We talked about that in episode 1 71, Adjust your savings plan to aim for this
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  total amount needed by the closing day.
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  So that you're not surprised by this, you know you're ready, you've
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  got the, down payment money and you've got your closing costs ready.
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  And now you might be saying, Ralph, okay, why does this help?
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  Because here's the thing.
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  You are going to struggle.
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  There's going to be stress, there's gonna be last minute mortgage things
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  that the last stress you need is to get a call from the, paralegal
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  who's working on the closing and say, oh, by the way, we made a mistake.
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  Your closing costs are gonna be this much more, and you're, you're scrambling.
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  You're like, I've already paid for this.
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  I, I bought furniture.
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  You know, I've got the, the movers ready to go.
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  I wasn't expecting this.
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  Where am I gonna get this money?
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  But if you do what I've talked about, you plan ahead.
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  It's going to significantly reduce the stress of that.
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  You're gonna educate yourself.
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  Maybe there's some things in that that you can shop around
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  and get a better price for.
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  And it's gonna replace that unknown with concrete numbers and you can include
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  that in your savings goal so that you don't have that last minute scramble.
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  And you can go to closing with a smile and confidence and peace,
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  knowing all the costs are covered.
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  And the next step is hand you the keys.
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  Welcome to your new home.
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  Let's pray together now.
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  Father God, we just thank you for providing for all of our needs.
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  Lord, we confess that the various costs involved in buying a home.
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  like closing costs can feel confusing and stressful and
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  just absolutely overwhelming.
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  Please grant us clarity, Lord, and diligence as we educate ourselves
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  on these expenses and really work to get those early estimates.
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  And overall, Lord, we ask you to help us be wise stewards by including those
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  closing costs in our savings goal, and guide us in preparing thoroughly for the
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  financial realities of home ownership.
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  Ensuring we can approach closing day with peace just knowing that all
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  the necessary funds are in place.
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  And we ask this as always, Lord, in confidence.
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  In Jesus' name.
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  Amen.
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  Listen, don't let closing costs catch you off guard.
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  Understand what they are.
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  Get an early estimate and include them in your savings plan.
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  'cause this is the key to a smooth and peaceful closing day.
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  You are moving towards freedom.
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  If this episode helps you, I'm gonna encourage you to share it
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  with somebody you know who might be going through the same process.
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  You can find resources and connect with our show at our website
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  that's at financially confident christian.com, and I've got a
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  special gift for you on your journey.
• 8:41
  Go to financially confident christian.com/master and get a free copy
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  of my book, mastering Your Finances.
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  It's a great book.
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  It's a powerful read, designed as a point to help you break that cycle of
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  financial shame and step into confidence.
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  Again, go to financially confident christian.com/master.
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  Now, tomorrow we're gonna move into the final stage of the home ownership process.
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  And that's how to budget for the ongoing cost.
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  A lot of people don't think about this.
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  They got through the mortgage, they got through the closing costs, they got moved
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  in, and now of a sudden it's like, wait a minute, I wasn't anticipating this.
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  So we're gonna talk about property taxes, we're gonna talk about
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  insurance and those unexpected repairs.
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  So your home remains a blessing because we don't want it to become a burden.
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  So you don't wanna miss that.
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  So make sure you join me tomorrow.
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  Now let's all go out there and be financially confident.
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  Christians, you can do this.
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  I have confidence in you.
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  Have confidence in yourself.
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  Stay financially savvy.
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  God bless you, and you have a great day today.