Closing Costs for Buyers

  • 05/28/21

When buying a home, it’s important to have a budget and make sure you plan ahead for certain homebuying expenses. Saving for a down payment is the main cost that comes to mind for many, but budgeting for the closing costs required to get a mortgage is just as important.
 

What Are Closing Costs?

According to Trulia:
 

“When you close on a home, a number of fees are due. They typically range from 2% to 5% of the total cost of the home, and can include title insurance, origination fees, underwriting fees, document preparation fees, and more.”

For example, for someone buying a $300,000 home, they could potentially have between $6,000 and $15,000 in closing fees. If you’re in the market for a home above this price range, your closing costs could be greater. As mentioned above, closing costs are typically between 2% and 5% of your purchase price.
 
Trulia gives more great advice, explaining:
 

“There will be lots of paperwork in front of you on closing day, and not enough time to read them all. Work closely with your real estate agent, lender, and attorney, if you have one, to get all the documents you need ahead of time.

The most important thing to read is the closing disclosure, which shows your loan terms, final closing costs, and any outstanding fees. You’ll get this form about three days before closing since, once you (the borrower) sign it, there’s a three-day waiting period before you can sign the mortgage loan docs. If you have any questions about the numbers or what any of the mortgage terms mean, this is the time to ask—your real estate agent is a great resource for getting you all the answers you need.”
 
Here is a list of fees that may be included in closing:

  1. Application Fee: This fee covers the cost for the lender to process your application.
  2. Loan Origination Fee: Which lenders charge for processing the paperwork for your loan.
  3. Credit Report Fee: For running your credit report.
  4. Underwriter Fee: For the underwriter, who assesses your credit worthiness.
  5. Home Appraisal: Of the property you hope to own to make sure its value matches the size of the loan you want.
  6. Title Search: To unearth any liens on the property that could interfere with your ownership of it.
  7. Private Mortgage Insurance (PMI): If you’re making a down payment that’s less than 20% of the home’s purchase price, chances are you’ll be required to pay PMI. If so, you may need to pay the first month’s PMI payment at closing.
  8. Homeowners’ Insurance: This covers possible damages to your home. Your first year’s insurance is often paid at closing.
  9. Survey Fee: If it's a single-family home or town home (but not condos).
  10. Taxes: Also called stamp taxes, on the money you've borrowed for your home loan.



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