Top 20 Closing Costs You Need to Know
How Much Money Do You Need to Buy a Home? Understanding the Top 20 Closing Costs for Home Buyers
Purchasing a home involves more than just the down payment. It's important to be prepared for various closing costs, which can add up quickly. Here's what you need to know about the main expenses associated with closing on a home.
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Essential Categories of Closing Costs
1. Down Payment: This could range from 3% to 20% of the home’s price, but programs like FHA loans might require as little as 3.5%. VA loans could even offer zero down options. Look into down payment assistance and grants that might cover this for you.
2. Earnest Money Deposit (EMD): Demonstrates your commitment, usually 1% to 3% of the home’s price, though this can be as low as $100 with certain programs like VA loans.
3. Commissions: These are paid to real estate agents. The seller usually covers the listing agent's commission, while the buyer pays the buyer’s agent’s fee, sometimes through seller concessions.
4. Loan-Related Fees: From loan origination to administrative costs, these will be detailed in your loan estimate. Always compare fees and rates among different lenders.
5. Transaction-Related Costs: These vary by state and involve escrow and other legal processes for the transaction.
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Comprehensive List of Top 20 Closing Costs
1. Down Payment: Typically, 3% or more of the purchase price.
2. Deposit: Also known as earnest money, often 1-3% of the purchase price.
3. Commissions: Paid to both the buyer’s and seller’s real estate agents. Commissions are negotiable.
4. Loan Origination Fees: Charged by the lender for processing your loan.
5. Appraisal Fees: To determine the property's value for the lender.
6. Credit Report Fees: For obtaining your credit history.
7. Title Insurance: Protects against title disputes.
8. Escrow Fees: Paid to the escrow company managing the transaction.
9. Recording Fees: For documenting the change of ownership with local authorities.
10. Survey Fees: To verify property boundaries.
11. Attorney Fees: If legal help is required during the transaction.
12. Home Inspection Fees: Essential for checking the property’s condition.
13. Pest Inspection Fees: Important in regions prone to termite issues.
14. Homeowners' Insurance: Usually the first year’s premium is paid upfront.
15. Property Taxes: Often prorated and paid at closing.
16. Prepaid Interest: Due from the date of closing to the first mortgage payment.
17. Private Mortgage Insurance (PMI): Required if your down payment is below 20%.
18. Transfer Taxes: Levied for transferring the property title.
19. Homeowners Association Fees (HOA): If applicable, might be required upfront.
20. Appraisal Shortfall: In a competitive market, you might need to cover the difference if the appraisal is below the selling price.
Why Professional Experience Matters
Navigating a real estate purchase requires experienced professionals, as the process can be complex and nuanced. Remember most real estate agents close less than 10 transactions a year, many less than five. Real estate buying and selling has many twists and turns so why choose a dentist who you like to play golf with but has only done 5 fillings a year! Choose experienced, multi transaction professionals who will support you in your real estate journey. Select a team that handles a large volume of transactions and can effectively guide you through these steps.
Legal Disclaimer
This blog does not constitute legal, financial, or professional advice and should not be treated as such. Always consult with a professional who is familiar with your particular factual situation for advice concerning specific real estate, legal, financial, or other matters before making any decision
GoWpNow and The Warburton Team help hundreds of buyers get home every year. We look forward to representing your best interests as a buyer, and we appreciate the opportunity to be of service.
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Thank you for considering GoWpNow and The Warburton Team as your partner in this exciting journey. We look forward to assisting you in finding the property that suits your needs.
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