While spring is usually one of the busiest times in the real estate market, COVID-19 has had a significant impact on the market. If you were planning to sell this spring, you may be wondering
What is covered in closing costs
Unfortunately, a home costs more than just the agreed upon sale price. When budgeting for a home purchase, it's important to not just plan for the down payment, but the closing costs as well. Read on to learn exactly what the closing costs include, as well as how much you should expect to pay in closing costs.
How much should I budget for closing costs?
On average, closing costs make up about 2% to 5% of the home purchase price - consequently, it can be a significant sum of money! At least three days prior to closing your lender will provide you with a Closing Disclosure detailing costs. However, it's important to budget for this expense well before that day. You don't want to be scrambling for funds just days before closing!
What do closing costs include?
Loan Origination Fees
This fee is what the lender charges for processing and underwriting your mortgage application. If you're purchasing the property without a lender you will not need to pay these fees. However, for the rest of us, this fee will total approximately 0.5% to 1% of the mortgage total. Sometimes this percentage is higher for smaller loans.
There are a number of charges grouped under service charges. These include the appraisal, credit report, tax status, title search and insurance, and survey fees. Appraisals and surveys tend to run between $300 to $500 each. Title services can total up to $2000, and is a fee that buyers can shop around for.
Transfer Taxes and Recording Fees
Transfer taxes will vary by state, but are around 1.28% in Washington. It can be negotiated whether the transfer taxes are paid for by the buyer or seller of the property.
Homeowners insurance, property taxes, and mortgage insurance (if needed) are often added in as well. If there is a homeowner's association, there may be monthly dues included as well.
Example closing costs
A buyer is purchasing a $275,100 home with a 5% down payment. The loan amount is $261,345. Closing costs are estimated at 2.5% of the loan value—so $6,533. The buyer made a $2,000 earnest money deposit, so they would need to bring $4,533 in cash at the time of closing. Altogether, this means that the potential homeowner will need to have access to approximately $18,300 in cash to pay for the down payment and closing cost net of the earnest money deposit.
Infomation found on https://magazine.realtor/.
From farming in Warden, WA, to living in Australia and then back to Wenatchee, Iâ€™ve always been profoundly aware of the fundamental need to help others. Whether through their financial picture or he....