A home is oftentimes the biggest purchase people make in their lifetime. But the “price” goes beyond just the amount of money you agree on with the seller, it also includes closing costs. So, before you move forward, it is important that you understand what other costs you can anticipate.
At the time of the closing, the title of the property is transferred from the seller to the purchaser. If the buyer is obtaining a mortgage, there is no need for them to bring a check for the full amount of the transaction. But there will still typically be closing costs due.
Overall, closing costs can typically range from 3% to 6% of the purchase price. So, if you’re buying a home that costs $300,000, you can anticipate that the closing costs will be between $9,000 and $18,000.
Closing costs include various fees that are associated with the purchase of a home. These may be split between the buyer and the seller, and they will include some or all of the following:
- Appraisal – The appraisal confirms the fair market value of the property.
- Attorney Fee – There is a fee for a legal professional to review the closing documents.
- Closing Fee – The closing company (or title company that conducts the closing) will charge a fee for conducting the closing of the property.
- Courier Fee – There is also a cost to transport the documents that are related to the transaction.
- Credit Report Fee – It is necessary for the lender to review the buyer’s / borrower’s credit score and history before approving them for the mortgage.
- Escrow Deposit for Property Taxes and Mortgage Insurance – Property tax (usually enough to cover two months) will be collected at the closing.
- Homeowner’s Insurance – Homeowner’s insurance paid is usually the premium for the first year of coverage.
- Home Inspection – Buyers will typically have an inspection performed to determine whether any repairs are required.
- Pest Inspection – An inspection for termites (and any related damage) is also usually performed on the property.
- Title Insurance – This coverage protects the buyer in the event that there are any liens on the property.
- Prepaid Interest – Some lenders will require prepaid interest (or points) to be paid.
- Recording Fee – These fees are charged by the local recorder’s office for the recording of public land records.
- Survey Fee – A survey is conducted to verify all property lines.
- Underwriting Fee – This is a fee charged to research whether or not to approve the purchaser for a mortgage.
- Transfer Tax – Transfer taxes are paid when the title of the property passes from the seller to the buyer.
If you’re in the market to purchase a home, we can help. Now is a great time to buy – especially given the historically low interest rate environment. Looking in a particular neighborhood or area? Give us a call and we’ll help you to find your next dream home.
Photo by Kelly Sikkema on Unsplash
Sources:
What are closing costs? Zillow. https://www.zillow.com/mortgage-learning/closing-costs/?118132884676kwd-328597374452499638018433
