If you’re planning to buy a home, be prepared to pay some of the closing costs upfront. These costs can vary depending on the type of loan you’re using, the size of your down payment, and other factors. Here are some of the most common closing costs that buyers are responsible for:
Down payment
Your down payment is the amount of money you’ll need to pay upfront when you purchase a home. Most lenders require a down payment of at least 3% to 20% of the home’s purchase price. The size of your down payment will depend on the type of loan you’re using and your creditworthiness.
Loan origination fee
The loan origination fee is a fee charged by the lender for processing your loan application. This fee is typically 1% of the loan amount, but it can vary depending on the lender.
Appraisal fee
Your lender will require an appraisal of the home you’re buying to determine its value. The appraisal fee can vary depending on the size and location of the home.
Home inspection fee
A home inspection helps identify any potential problems with the home that may need to be addressed before you close on the sale. The cost of a home inspection can vary depending on the size and age of the home, but it typically ranges from $300 to $500.
Title insurance
Title insurance protects you and your lender from any issues that may arise with the property’s title, such as liens or other legal disputes. The cost of title insurance can vary depending on the state you’re in and the purchase price of the home.
Escrow fees
Escrow fees are paid to a third-party company that handles the closing of the sale. This includes collecting and holding the buyer’s funds and disbursing them to the appropriate parties at closing. The amount of money held in escrow typically depends on the purchase price of the home.
Property taxes and insurance
Depending on when you close on your home, you may be required to pay prorated property taxes and insurance premiums at closing. These costs can vary depending on the location of the home and the time of year you close.
Buying a home comes with a number of upfront closing costs that buyers are responsible for paying. Make sure to budget for these costs and understand how they can impact your overall home-buying expenses. By working with a knowledgeable real estate agent and lender, you can better prepare for these costs and ensure a smoother home-buying experience.