Closing costs are not always factored in to a buyers budget when they begin looking for a home, but they should be since, according to Zillow, "buyers will pay between 2 and 5 percent of the purchase price of their new home in closing fees. So, for example, if you're purchasing a $500,000 home, you can expect to pay somewhere between $10,000-$25,000 in closing costs. A sizeable chunk of change for sure!
Lenders are required by law to provide you with a good faith estimate (GFE) of what your closing costs will be within 3 days of when you apply for a loan, but it is an estimate afterall, and the fees can change, so it's a good idea to have an understanding of all that's included so you know what to expect when you see your HUD-1 settlement statement. Closing costs vary based on where you live and the home you buy, but here's a list of what's often included, also courtesy of Zillow:
- A fee for running your credit report
- A loan origination fee
- Attorney's fees
- Charges for any inspection required or requested by the lender or you
- Discount points, which are fees you pay in exchange for a lower interest rate
- Appraisal fee
- Survey fee, which covers the cost of verifying property lines
- Title insurance, which protects the lender in case the title isn't clean
- Title search fees, which pay for a background check on the title to make sure there aren't things such as unpaid mortgage or tax liens on the property
- Escrow deposit, which may pay for a couple of months property taxes and private mortgage insurance
- Pest inspection fee
- Recording fee, which is paid to a city or county in exchange for recording the new land records
- Underwriting fee, which covers the cost of evaluating a mortgage loan application
As a buyer, you should feel very comfortable with your level of understanding of your estimated closing costs. Your lender should offer a thorough explanation, but your agent is also a great resource for this information. For more information about closing costs, and for general real estate advice, feel free to reach out to our experts at 617-236-0353 or through our website at www.thecharlesrealty.com.