We have briefly talked about closing costs in a few of our articles. Today we are going to go into further detail about it. If you are trying to get a quick estimate for budgeting reasons, it is about 2-4% of the purchase price of your home. It can fluctuate and anything can change but that is a good base idea.
If you are unsure of what goes into a closing cost and what it is exactly, we will discuss it even further. One of the main – and very important! – components is your home inspection. The inspection will provide you with a list of what they find throughout the entire home. When hiring your inspector, do your research and ask for recommendations. You want to make sure you have a good one that does not cut corners and will tell you the truth. You need to know the ins and outs of the potential house you will own! For example, how are the pipes and foundation? Is the roof ok? Are there rodents in the attic? Does the air-conditioning unit function properly? This is something you want to pay for so you won’t be in for any surprises after you move in to the home!
Some homeowners decide to hire an attorney to help with the closing process. This is not necessary. But, if you do decide to do this, factor that in your closing cost budget. Most attorneys charge by the hour.
Lender fees are something else you are responsible for. Each lender handles these costs differently so you will want to find out from your lending officer what their fees are and how they expect to be paid. For example, some lenders add the cost into the mortgage. Other lenders require a fee to be paid during the escrow signing. This also takes care of appraisal fees, paperwork fees, administration fees, etc.
Title fees are a big proponent of closing costs – up to or more than 50%! Title fees consist of the cost of lender title insurance, title search, etc.
Something else to keep in mind is the fact that you are likely putting a down payment down as well. Down payments are typically a minimum of 10% of the cost of the home. Some down payments can be more. It just depends what you qualify for.
If you plan on purchasing a home in the foreseeable future, be sure to keep these additional costs in mind! As always, if you are ever unsure about anything, ask a professional for help and their advice!