What is covered in closing costs

Dated: 02/02/2020

Views: 51

The Ins and Outs of 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.

Service Charges

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.

Escrow Items

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/.

Blog author image

Tricia McCullough

From farming in Warden, WA, to living in Australia and then back to Wenatchee, I’ve always been profoundly aware of the fundamental need to help others. Whether through their financial picture or he....

Latest Blog Posts

The pros and cons to listing a home during the COVID-19 crisis

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

Read More

NWMLS Stay Home, Stay Healthy Order

Northwest Multiple Listing Service® & Washington REALTORS® Governor Inslee issued a statewide “Stay Home, Stay Healthy Order” (the “Order”) that became

Read More

How to safely house hunt in light of COVID-19

As COVID-19 spreads across the globe it has seemed to touch every area of life, including real estate. You may be wondering if real estate is completely shut down at this time. The short answer is

Read More

Spring Cleaning Tasks to Tackle while Quarantined

A lot of us are spending a lot more time in our homes lately than we're accustomed to. COVID-19 has done a lot to change daily life and routines around the world. We're all feeling many different

Read More