4 Things You Need to Know about Closing Costs
Posted on Friday, January 13, 2017
You're just about to close on your home purchase: what extra costs are coming your way?
Buying a home isn't cheap, and the costs aren't just in the purchase price. From required renovations to moving expenses, you know that you're going to need to invest a lot to make a move to your new home. Getting clarity about your projected expenses can help you know whether that house is within your budget. When it comes to closing costs, what can you expect to add when you're buying a house?
1. What Are Closing Costs?
There are many costs involved in purchasing a home, and closing costs are some of the last costs that you pay as the title of the home is transferred from the seller to the buyer. The closing costs for a home include legal fees, inspection fees, and transactions that were deferred. For example, if you paid staging fees so that you could sell your home more easily, then you may have added these to the closing costs for the home. Anything that the buyer or seller needs to pay for at the end of the transaction is considered to be a closing cost.
2. What Closing Costs Do Buyers Pay?
As the home transitions to new owners, the buyer or the seller will need to pay those involved in the transaction, such as lawyers and mortgage brokers. Buyers and sellers need to pay different fees.
The buyer normally pays some legal fees for the transaction. Depending on the local laws, the buyer may need to pay for additional document and transaction fees and for fees to have the transactions recorded. Closing costs also include the costs to survey and inspect the property. These include inspection fees, appraisal fees, and survey fees to confirm the condition and dimensions of the property. You'll also need to pay to protect the property. You'll need to pay mortgage insurance if you have a smaller downpayment, and you'll also need to purchase home insurance.
3. What Closing Costs Does the Seller Pay?
You may be selling a property, or you may be selling your old property and purchasing a new one. What does the seller need to pay during a real estate transaction?
If you use a real estate agent, the seller pays the real estate agent upon the sale of the home. This is usually one of the largest costs. Ask your real estate agent about the percentage you will pay prior to working with an agent. The seller will also need to pay legal fees and will pay for a title search on the property.
The buyer and the seller may need to pay pro-rated amounts to the government or the homeowner association to ensure that their family is up to date on property taxes and association dues.
Make sure that you understand the closing costs on your new home.
4. How Much Will Your Closing Costs Be?
Closing costs vary from situation to situation. In general, the costs tend to run from 2 to 6 percent of the total purchase price. They are often several thousand dollars in total.
You can reduce your closing costs by working with a bank that offers a reduction in closing costs. You may also have lower closing costs as a current or former member of the military or of certain unions. If you close at the end of the month, you'll need to pay fewer prorated fees.
If closing costs are a concern for you, you can also look at placing your closing costs into your mortgage loan. This will add to your mortgage, but you'll be able to more easily purchase your property for a smaller addition to the mortgage as a whole.
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