What Every Homebuyer Should Know About Closing Costs
Congratulations! You've found your dream home and your offer has been accepted. But before you get the keys and celebrate with a housewarming party, there's one more hurdle to jump: CLOSING COST.
Closing costs are all the fees and expenses you'll need to pay on top of the purchase price of your home to finalize the sale. While the excitement of becoming a homeowner is real, understanding closing costs is crucial for budgeting and ensuring a smooth closing process.
What Are Closing Costs?
A recent article from Bankrate explains:
“Closing costs are the fees and expenses you must pay before becoming the legal owner of a house, condo or townhome . . . Closing costs vary depending on the purchase price of the home and how it’s being financed . . .”
Simply put, your closing costs are the additional fees and payments you have to make at closing. According to Freddie Mac, while they can vary by location and situation, closing costs typically include:
- Government recording costs
- Appraisal fees
- Credit report fees
- Lender origination fees
- Title services
- Tax service fees
- Survey fees
- Attorney fees
- Underwriting Fees
The Cost of Owning Your Dream
Closing costs typically range from 2% to 5% of your home's purchase price. So, on a $300,000 home, that could translate to $6,000 to $15,000. Remember, this is just an estimate. The exact amount can vary depending on:
- Location: Areas with higher property taxes or attorney fees might see slightly steeper closing costs.
- Loan Type: Different loan programs (FHA, VA, etc.) might have specific associated fees.
- Negotiation Power: Origination fees, for example, can sometimes be negotiated with your lender.
Make Sure You’re Prepared To Close
Freddie Mac provides great advice for homebuyers, saying:
“As you start your homebuying journey, take the time to get a sense of all costs involved – from your down payment to closing costs.”
The best way to do that is by partnering with a team of trusted real estate professionals. That gives you a group of experts to help you understand how much you’ll need to save and what you’ll want to be prepped for. It also means you have go-to resources for any questions that pop up along the way.
Bottom Line
Planning for the fees and payments you'll need to cover when you're closing on your home is important. Partnering with a local real estate professional can give you the guidance and confidence you need throughout the process.