It’s a bugaboo, for sure. There’s so much involved when
buying a home, and if you’re buying a home for the first time, it can seem
overwhelming.
It’s frustrating to save for a down payment only to realize
that there’s STILL more money you need to have before you can move into your
dream home.
Let’s break down this monster under the bed and find out
what he’s made of.
Closing costs, or the fees involved in transferring
ownership from one party to the next, can vary depending on the kind of house
you buy and the type of loan. Generally speaking, though, closing costs are
between 2%-5% of the value of the home.
So on a home that’s selling for $200,000, you could pay
anywhere from $4,000-$10,000. That’s a chunk of change!
What are those fees?
Inspections—You’ll
probably want to hire a home inspector before closing the deal on your new
home. Why? To make sure the home isn’t in need of any major repairs. You’ll
also want to check for termites, and other wood boring pests, too. Many lenders require that you get a termite inspection, but
if your lender doesn’t, get one anyway!
Survey—Not all,
but many states require you to hire a surveyor to verify that the deed is
correct with the lot size. The state of Virginia certainly does. So you'll have to budget for that.
Loan Origination Fee—To
handle your real estate transaction, most mortgage lenders, brokers, or banks
charge about 1%, sometimes less.
Attorney’s Fees—Ah,
attorneys! Where would we be without them? In this case, lawyers prepare and
review various legal documents in preparation for closing.
Property Taxes—Usually
the buyer has to pay several months’ worth of property taxes at the time of
closing.
Title Insurance—Title
insurance is a one-time insurance fee that protects your home from unknown
fraudulent transactions. The title to the property is fully researched for
errors, liens, unpaid taxes, etc. The errors that are found must be corrected before the
transaction can be closed. Title insurance also protects your home from what
cannot be seen. For example, a former owner claims to have title to the
property because her name was forged on legal documents. Title insurance
protects you against these kinds of claims. Don’t even think about not getting
it!
I’d love to tell you that these fees are the full extent of
your closing costs, but they aren’t. There could be more. However, these are the
main fees. The Consumer Financial Protection Bureau has an interactive example of closing costs, which is very helpful.
You’ll also need to talk with your loan officer to find out the full range of costs for your situation.
You’ll also need to talk with your loan officer to find out the full range of costs for your situation.
If you'd like to learn more about title insurance and real estate closings, go to our website: www.lillytitle.com
