Tuesday, March 15, 2022 / by Raj Jaggi
It's critical for a homebuyer to prepare and budget for the costs that will arise during the process of purchasing a property. While most individuals recognize the need of saving for a down payment, 41% of homebuyers were startled by their closing fees, according to a recent survey. Here's some information to get you started so you're not surprised when it comes time to close on your house.
What Are Closing?
Some folks may be startled by closing charges since they don't understand what they are or cover. U.S. News and World Report said the following:“Closing costs encompass a variety of expenses above your property’s purchase price. They include things like lender fees, title insurance, government processing fees, upfront tax payments, and homeowners insurance.”Put another way, your closing costs are a collection of fees and payments made to a range of people and organizations involved in your transaction. According to Freddie Mac, closing expenses might vary depending on the area and situation.
- Government recording costs
- Appraisal fees
- Credit report fees
- Lender origination fees
- Title services
- Tax service fees
- Survey fees
- Attorney fees
- Underwriting Fees
How much money should you set aside for closing costs?
Understanding what closing expenses include is essential, but knowing how much money you'll need to set aside to cover them is crucial to accomplishing your home-buying objectives. Closing expenses are normally between 2% and 5% of the entire purchase price of your property, according to the Freddie Mac article linked above. With that in mind, here's how you can estimate how much money you'll need for closing fees.
Let's imagine you come across a home for $350,300 that you'd want to buy. Your closing costs could range from $7,000 to $17,500, based on the Freddie Mac estimate of 2-5 percent.Keep in mind that your closing costs will be more or lower if you buy a house outside of this price range.
What's the Best Way to Make Sure You're Ready When It's Time to Close?
Freddie Mac offers excellent advice to first-time homebuyers, saying:“As you start your homebuying journey, take the time to get a sense of all costs involved – from your down payment to closing costs.”
Working with a team of trustworthy real estate pros is the best approach to figure out what you'll need at the closing table. An agent can assist you in finding a lender, and the two of you can work together to find answers to your questions.
In today's real estate market, it's more vital than ever to ensure that your budget accounts for any closing costs and payments. Consult a local real estate agent to ensure you have the information you require to feel confident about the home buying process.