Here are the closing costs you should expect when buying a home.
When buying a home, it’s important to have a budget and that you plan ahead for several expenses. Saving for a down payment is the primary cost that comes to mind for many, but budgeting for closing costs is just as important.
What are closing costs? They’re the fees associated with purchasing a home. When you close on a home, a number of fees are due. They typically range from 2% to 5% of the total cost of the home and can include items such as title insurance, origination fees, underwriting fees, and document preparation fees. For example, someone buying a $500,000 home could potentially have to pay $10,000 to $25,000 in closing fees. If you’re in the market for a home above this price range, your closing costs could be greater.
When it comes to closing on a home, there will be a lot of paperwork in front of you on closing day and not enough time to read through it all. Work closely with your real estate agent and lender to get all the documentation you need ahead of time. The most important thing to read is the closing disclosure statement, which shows your loan terms, final closing costs, and any outstanding fees. You’ll get this form about three days before closing since there’s a three-day waiting period before you as the borrower can sign the mortgage loan documents. If you have questions about any of the numbers or are curious what some of the mortgage terms mean, this is the time to ask. Your real estate agent is a great resource for getting all of the information you need.
The bottom line is this: As home prices rise and more buyers find themselves in bidding wars, it’s more important than ever to ensure your home-buying plan includes budgeting for closing costs.
If you have questions about this topic or would like more real estate tips, feel free to call or email me. I’d love to hear from you.