2 minute read.
Purchasing a new home is an exciting time. A new house is a large investment and something that can take years to achieve. When purchasing a home, experts recommend you provide at least 20% of the home’s purchase price as a down payment. This will help you avoid additional fees and help keep your monthly payments fairly low. The down payment is not the only cost you need to save for; you should also prepare to pay closing costs.
What Are Closing Costs?
Closing costs are various fees that are associated with the home-buying and selling process. These can vary depending on the particular property and could be paid by either the buyer or seller. Generally, these fees will equal to approximately 2% to 5% of the home’s purchase price. For example, if you are buying a home at $500,000, you can expect to pay between $10,000 and $25,000 in closing costs.
Your closing costs will vary depending on your location, your loan type, and the type of property you choose to purchase. A few common types of closing costs that you can expect to pay include:
There are several fees you may be charged to help process and finalize your home loan. For example, you may pay an application fee, which includes the cost of processing your mortgage application, as well as courier fees for securely and quickly transporting documents for the home loan. You could also expect underwriting fees which cover the cost of underwriting and approving your loan.Home Inspection
While a home inspection is not mandatory, it is recommended. This will help you determine if there are any major issues with the home prior to closing and could be a tool to renegotiate the price.
Unlike the home inspection, an appraisal is almost always necessary. An appraiser will come to the property and determine the full value of the home. Be aware that this process could cost you hundreds of dollars.
If you have hired a lawyer to look over your real estate transaction and to ensure everything is in order, you will need to pay for their time. This can cost several hundred or even thousands of dollars depending on the extent of work the lawyer had to complete.
If you are worried about paying for closing costs, there are many options available. You can include several of these fees into your monthly payments. This means you may have higher monthly payments for the duration of the loan. You could also negotiate them in the transaction and have the buyer or seller pay for them directly.
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