Most people are aware of the down payment when it comes to buying a home, but unfortunately there are additional upfront fees and costs. How much are these costs and when does a buyer pay for them? This is a series of blog posts specifically aimed at young adults or other first time home buyers, and today we’ll examine how to plan for closing costs.
Imagine a happy family who finds the perfect house, their offer is accepted, and they’re on their way to closing! What are some of the costs that can come up?…
(All items that are paid at closing are added together for one check to the title company, then they distribute the money to the other parties)
Inspections (Paid at the time of occurrence to the home inspector)
Appraisal (Paid to the mortgage company either when they order the appraisal or upon closing)
Application fee (Paid at closing-the money goes to the mortgage company)
Underwriting fee (Paid at closing-to the mortgage company)
Taxes (Paid at closing-prorated based on ownership)
Prepaid Homeowner’s Insurance (This will be a few months of the Homeowner’s Insurance that will be prepaid at closing)
Title Insurance (Paid at closing-to the title company)
Closing fee (Paid at closing-to the title company)
Courier, Overnight, and Wire fees (Paid at closing-to the title company)
Administrative fee (Paid at closing-to your real estate company)
Many of the taxes and insurances are wrapped into the loan, these are called Escrows.
All in all, Realtor.com reports that average closing costs will range from 3%-6% of the purchase price (this is in addition to the down payment). For more precise numbers talk to your lender and real estate agent.