What to Know About Closing Costs Before Buying a Home
So, you’re thinking about buying a home? That’s awesome! Buying a home is a big deal, and there’s a lot to think about. You’re probably saving up for a down payment and searching homes online, but there’s something else to factor in before buying a home: closing costs.
What Exactly Are Closing Costs?
When you’re under contract on a house, there are some extra fees outside of your new home loan that you have to pay. These fees can include things like:
- Government recording costs
- Appraisal fees
- Credit report fees
- Lender origination fees
- Title services
- Tax service fees
- Inspection fees
Some of these costs are paid prior to closing on your new home, while others are paid at the closing table.
How Much Will I Need to Pay?
According to Freddie Mac, the average closing costs are about 2% to 5% of your home’s purchase price. If you’re eyeing a house that’s priced around the average, say $384,500, your closing costs could be somewhere between $7,690 and $19,225. That’s a wide range, right? The exact amount can change based on where the house is located, the loan type, and several other details about the sale.
Getting Ready for Closing Costs
It’s a good idea to know about these closing costs up front so they don’t surprise you later. The best way to know what you’ll need to pay is to talk to your mortgage team. They can give you the estimate on what to expect for your specific situation. Your pre-approval from your favorite mortgage broker (that’s us!) factors in your estimated closing costs so you are prepared well before you start writing offers on beautiful homes!
Work With a Pro Before Buying a Home
Trying to figure out all this stuff on your own can be tough. That’s why having a real estate agent and mortgage expert in your corner is a big plus. They know the ins and outs of the local market and can give you advice on what to offer for a house and how to handle your closing costs. Freddie Mac gives this piece of advice:
“As you start your homebuying journey, take the time to get a sense of all costs involved – from your down payment to closing costs.”
Yes, that’s right. The closing costs are in addition to your down payment. In some cases, your closing costs can be covered, or partially covered, by seller concessions, lender credits, or down payment assistance funds. Knowing this probably brings up a lot of questions, and that’s what we are here for!
Now What?
If you’re getting ready to buy a home, don’t let closing costs catch you by surprise. Plan for them from the start, and you’ll be in a much better spot. If you have questions or need some guidance, we’re here to help. Let’s make sure you have everything you need to move forward on your homebuying adventure.
