Closing costs play a major factor in every home buying contract. Most first time homebuyers do not realize how significant closing costs are in a home's final price; some can go as high as 15 percent. Lenders may often require buyers to pay for these costs upfront while some lenders include closing costs into the buyer's loan. Recognizing what these costs are as early as possible will help homebuyers budget their funds and even negotiate for a lower contract price.

Homebuyers have to keep in mind that lenders base their maximum loan amount not on the net price or the difference between sales price and closing costs but on the sales price of the property. Closing costs can be assigned differently and you can ask your Realtor and lender to assemble a deal that will work best with your budget.

The first step in understanding closing costs is to learn what buyers are typically responsible for. Barron's 'Smart Consumer's Guide to Home Buying' explains that it's important to understand that custom - and not law - dictate how closing costs are allocated and what the buyer and seller are required to pay as part of the contract.

Buyers are responsible for paying all fees and discount points of the loan. These costs are usually added by the lender at the end of the contract and the costs may vary depending on the financial institution. Bankers sometimes waive these fees for favored customers or as part of the contract, however, you still need to estimate these costs as early as possible during the loan financing process.

Paying the homeowner's title insurance policy premium is also the responsibility of the buyer. This has to be paid first even before the home purchasing process begins in most cases. It would be better to pay for this premium upfront so that it won't be included into your loan package. The premium differs with each insurance company so do some research on insurance policy rates for homeowners and shop around for the best deal.

The following costs are usually the responsibility of the seller. Commissions on sales - commissions are given to agents of both the buyer and seller. Commission payouts are set depending on the buyer's and seller's agreements with their respective agents.

Cost of Inspections - The seller is responsible for all home testing and inspections before any contract is signed.

Title's insurance - Insurance on the title are traditionally shouldered by the seller as part of closing costs. Many first time homebuyers incorrectly assume that they need to take care of these costs.

Recognizing each component of the closing costs can give any homebuyer an accurate estimate of the final contract price. You can ask for an estimate from your lender way ahead of the signing date as most are willing to breakdown all these costs and explain how they fit in your loan package.

Homebuyers looking for MN houses for sale can go online and search for properties by price, location and neighborhood by using the Minnesota MLS to find properties throughout the state.