As a homebuyer, its important to plan and budget for the expenses youll encounter when you purchase a home. While most people understand the need to save for adown payment, a recentsurveyfound 41% of homebuyers were surprised by their closing costs. Heres some information to help you get started so youre not caught off guard when its time to close on your home.
What Are Closing Costs?
One possible reason some people are surprised by closing costs may be because they dont know what they are or what they cover. According toU.S. News and World Report:
Closing costs encompass a variety of expenses above your propertys purchase price. They include things like lender fees, title insurance, government processing fees, upfront tax payments and homeowners insurance.
In other words, your closing costs are a collection of fees and payments made to a variety of individuals and organizations who are involved with your transaction. According toFreddie Mac, while they can vary by location and situation, closing costs typically include:
- Government recording costs
- Appraisal fees
- Credit report fees
- Lender origination fees
- Title services
- Tax service fees
- Survey fees
- Attorney fees
- Underwriting Fees
How Much Will You Need To Budget for Closing Costs?
Understanding what closing costs include is important, but knowing what youll need to budget to cover them is critical to achieving yourhomebuying goals. According to theFreddie Macarticle mentioned above,the costs to close are typically between 2% and 5% of the total purchase price of your home. With that in mind, heres how you can get an idea of what youll need to cover your closing costs.
Lets say you find a home you want to purchase for themedian priceof $350,300. Based on the 2-5%Freddie Macestimate, your closing fees could be between roughly $7,000 and $17,500.
Keep in mind, if youre in the market for a home above or below this price range, your closing costs will be higher or lower.
Whats the Best Way To Make Sure Youre Prepared At Closing Time?
Freddie Macprovides great advice for 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.
The best way to understand what youll need at the closing table is to work with a team of trusted Seven Gables agent, who can help connect you with a trusted lender, and together they can provide you with answers to the questions you might have.
Bottom Line
In todays real estate market, its more important than ever to make sure your budget includes any fees and payments due at closing. Connect with a Seven Gables Advisor, so you have the knowledge you need to be confident going into the homebuying process.
