What Are Closing Costs in Real Estate?
If you’re thinking about buying a home at some point in the future, you’ll want to be aware of closing costs you will need to pay when it comes time to solidify your home purchase. Closing costs vary on a state-by-state basis, but they’re typically 2 to 5% of the loan principal. According to ClosingCorp, a real estate data firm, the average total for closing costs in the U.S. is $4,876, and the highest closing costs are in the Northeast. In this article, we’ll break down some typical closing costs, so you know what to expect when it comes to buying your dream home.
Are you buying a property that’s not completely new? If so, you’ll need to pay about $450 for a title search. Your mortgage lender will send someone to search local property records for the title of the home.
In case there are issues with ownership after the home is sold, your lender will require you to get title insurance. This will typically cost 0.5 to 1% of the loan amount.
Someone will need to evaluate and verify your mortgage. Typically an underwriting fee is about .5% of the loan amount.
Appraisal and survey fees:
In order to confirm the fair market value of your home, you’ll need to get an appraisal and survey. These two services usually cost a few hundred dollars.
Did you know that you typically have to pay the first year of homeowners insurance at closing? Some states with the most expensive homeowners insurance include Louisiana, Texas, and Florida. Some states with the least expensive homeowners insurance include Oregon, Utah, and Idaho.
Private mortgage insurance (PMI):
Is your down payment less than 20%? If so, you may want to consider paying for PMI. This helps protect the lender against losses if you’re not able to repay your loan.
Your lender can provide you with an estimate of closing costs
Once you have settled on a home, the lender should give you what is called a “Good Faith Estimate. If they don’t, be sure to ask for one. When it comes to closing time, you should get a final “Settlement Statement that has the final closing costs.
How credit affects buying power
When you have bad credit, you can expect your creditworthiness to be affected in many ways. Any lender, whether for a mortgage or getting a car, turns to your credit score to learn how responsible you are in paying your bills. A lender needs to know that you will be able to pay the loan back.
If you are someone that is suffering from poor credit, it may be time to look into credit repair services. A reputable credit repair company can help you get your credit back in good standing.
Now that you know more about some of the most common closing costs, hopefully you feel prepared to buy the home of your dreams. Too many prospective homeowners underestimate the amount of money it will take to get into their new digs. If you can be realistic about the costs, then you won’t be disappointed or surprised when it’s time to sign the papers and get your new keys.