When you’re buying a home, budgeting for closing costs is a must. It’s important to remember that there are additional expenses associated with becoming a homeowner.
To help you plan, we’ve rounded up everything you need to know about paying closing costs on a house. Here’s your go-to closing cost guide.
What are Closing Costs?
Closing costs are the fees you need to finalize the sale or mortgage on a home. You’ll also pay closing costs when you refinance in some cases.
There are a number of fees included in closing costs. These fees are paid at, or before, your closing. Fees include real estate commission, underwriting fees, title fees, and insurance fees.
Who Pays Closing Costs?
Closing costs are almost always paid for by the buyer with a few exceptions. The seller will pay real estate commissions and a few other small fees.
If you’re buying a home, you’ll want to plan on paying the majority of the closing costs. If you can’t afford to pay the closing costs, speak with your mortgage company or your realtor about negotiating with the seller to pay more.
How Much are Closing Costs?
Closing costs can vary depending on your financing, real estate fees, and the price of your home. Prior to closing, you’ll typically pay an appraisal fee, a home inspection, and an application fee. These fees will vary between $300 and $500 each on average.
The remaining closing costs will be between 2% and 5% of the purchase price. Closing costs include loan interest, origination fees, discount points, mortgage fees, property taxes, homeowner’s insurance, title search fees, and title insurance.
Buying a home in cash will lower your closing costs. You won’t have to pay any of the costs or fees associated with financing.
In addition, you’ll also need to bring your down payment to the closing table. This along with the closing costs is known as the cash to close. This is the total amount you’ll need to pay in order to buy the home.
Your mortgage company, title company, attorney, and realtor will compile the final figures required for closing. The biggest expense will typically be your down payment. This is the amount of cash you’re paying upfront for the home.
Budgeting for Closing Costs
Before you buy a home, you’ll need to figure closing costs into your budget. These costs are in addition to your down payment. Let’s say you want to put $100,000 down on your home and your closing costs are estimated to be $6,000. Your cash to close will be $106,000.
To budget for closing costs, you’ll want to keep a little extra aside. If you don’t want to take it from your down payment, create a budget for yourself to stick to. Any extra you can put away will help cover your closing costs.
Remember that any additional inspections or repairs you do post-closing are additional expenses. Factor your renovations, furniture, and moving expenses into another budget.
Closing Costs 101
When you’re busy saving for a down payment, you’ll also want to plan for additional closing expenses. When budgeting for closing costs, saving a little extra is always a smart idea.
From the taxes and fees to everything in between, your realtor will help you understand everything that goes on at the closing table.
If you’re ready to get in touch with a local Emerald Coast real estate professional, fill out the contact form here. You’ll be one step closer to finding your beachside dream home.