Let's talk about closing costs.
When purchasing a home, everyone knows you need a down payment, but many people dont realize that in addition to your down payment, more funds are needed to cover your closing costs. Closing costs can include title insurance, tax and utility reimbursements, transfer tax, conveyancing fees, and miscellaneous smaller fees for services like notaries and wire transfers. If you are getting a mortgage, your lender could also require funds to be held in escrow for taxes and insurance, and charge underwriting and application fees.
So how much should you budget for closing costs? I typically tell my buyers to budget anywhere from3-4% of the cost of the home. Here is a quick breakdown of what you may need to factor into your total out of pocket when buying a home:
- appraisal fee: $400-500
- underwriting and application fees: $1000-$2000
- title insurance: 0.5-1% of the purchase price
- transfer tax: 1-2.5% of the loan (this is sometimes split between buyer and seller)
- mortgage insurance: 0.5-1.5% of the loan
- prepaids: typically a full year of your property taxes and homeowners insurance are required upfront)
- any hoa fees or capital contributions
as home prices are rising and more buyers are finding themselves competing in bidding wars, it's more important than ever to make sure your plan includes budgeting for closing costs. Keep in mind that these fees vary depending on location, loan program, and lender.
If youre thinking about buying and wondering what your fees might be, send me a message i would be happy to put together an estimate for you!