Let's Talk About Buyer Closing Costs
When purchasing a home, everyone knows you need a down payment, but many people don't realize that in addition to your down payment, more funds are needed to cover your closing costs. Closing costs are fees that can include title insurance, tax and utility reimbursements, transfer tax, conveyancing fees, and miscellaneous smaller fees for services like notaries and wire transfers. If you are getting a mortgage, your lender could also require funds to be held in escrow for taxes and insurance, and charge underwriting and application fees. This may all sound like real-estate slang, so let me break it down for you...
How much should you budget for closing costs? I typically tell my buyers to budget anywhere between 3-4% of the price of the home. Here is a quick breakdown of what you may need to factor into your total out-of-pocket when buying a home:
- Appraisal fee: $400-500 Underwriting and application fees: $1000-$2000
- Title insurance: 0.5-1% of the purchase price
- Transfer tax: 2-4% of the loan (in Pennsylvania this is typically split between buyer and seller)
- Mortgage insurance: 0.5-1.5% of the loan (if applicable)
- Prepaids: typically a full year of your property taxes and homeowners insurance are required upfront)
- Any HOA/condo fees or capital contributions
As home prices and interest rates continue to rise, it's more important than ever to make sure your plan includes budgeting for closing costs. Keep in mind that these fees vary depending on location, loan program, and lender.
If you're thinking about buying and wondering what your total out-of-pocket cost might be, send me a message I would be happy to put together an estimate for you!