What Are Closing Costs?
One crucial aspect of purchasing a home that often catches first-time buyers by surprise is closing costs. Let's break down what closing costs are, and examine a list of typical buyer closing costs to help you prepare for this important step in the homebuying process.
Understanding Closing Costs
Closing costs are the fees and expenses that both buyers and sellers incur to complete a real estate transaction. They are typically paid at the closing, which is the final stage of the homebuying process when ownership of the property is transferred from the seller to the buyer.
Buyer closing costs can vary significantly depending on factors such as location, loan type, and the terms of the purchase agreement. Typically buyers are advised to budget 3-6% of the purchase price to put towards closing costs. In some cases, buyer's can negotiate their closing costs can be paid by the seller up to a certain amount, depending on their loan type. Regardless, It's essential to be aware of these costs and budget for them to avoid any last-minute surprises.
Closing Costs Buyers Can Expect:
- Loan Origination Fees
- Title Search / Title Insurance
- Attorney Fees
- Appraisal Fee
- Prepaid Property Tax Credit To Seller
- Private Mortgage Insurance (PMI, required if down payment less than 20%)
- Deed Recording Fee
- Prorated HOA Fee (if in one)
- Home Owners Insurance Premiums
- Misc. (Courier Fees, Document Preparation Fees, Wire Transfer Bank Fees, Etc..)