Considering Your Closing Costs
Buying a house is very exciting, but what is it going to cost you? When you know all the costs upfront, it helps you make more informed decisions when buying a home. The truth is that good deals go fast, and knowing your numbers ahead of time will help you make a better choice when the time comes.
I believe buying a house should be a stress-free process, not something that gives you an ulcer. Knowing these numbers will help. Closing costs are going to run you between 3% and 5% of the purchase price. This means that if you’re buying a $200,000 home, closing costs will run between $6,000 and $10,000.
Closing costs will vary depending on the state, loan type, and lender. This is why it’s important to pay close attention to all the fees. To help you, we’re going to list out some of the closing costs that you’re going to see on your settlement statement because we don’t want you to have any surprises.
Appraisal And Inspection Fees
First off, let’s start with the appraisal fee. An appraisal fee is going to run you between $525 and $855 depending on the type of loan that you’re getting and the location of the property. An appraisal is so important for you to have because you want to make sure the home is worth at or above what you are paying for it.
The next expense that’s commonly seen is a home inspection. This expense is going to cost you about $450 to $550, depending on the home size. This is something you’re going to want to get because you want to make sure the property has sound bones with no structural issues.
Most buyers spent, on average, about 15 minutes in a home when deciding that they should make an offer on it. They don’t have time to check things like plumbing, electrical, or even the AC units. So you want to make sure the property that you are buying has good structure and good bones.
Homeowner Insurance And Title Insurance
The next line item is homeowners insurance. This is to secure and protect the asset in the event of a disaster and includes your fire and liability insurance. In Central Pennsylvania, homeowner’s insurance is going to run you about $800 to $1,200 depending on the home size.
The next line item you’re going to see is title insurance. In the state of Pennsylvania, most places are 2%. In some of the big cities, you’re going to see title insurance run you 3%. This item is to make sure that you are getting a clean title to your home with no outstanding tax liens or outstanding mortgages on the home itself. If there is, you are now responsible for paying it—even if you weren’t the one that took out that mortgage or owned that home at the time of the back taxes.
Title insurance is going to protect you from all of those unknowns. It’s something that every lender in the country is going to require you to have if you have a mortgage on the property.
Lender Fees, Escrows, And Pre-Paids
The next line item is very common: the lender fee section. It may be disguised as a lender fee, a lender administration or processing fee, or an underwriter fee. Here’s the reality, folks: the underwriter, the processor, and the lender all want to get paid for doing their job. It’s very common and you’re going to have it.
There are some lenders out there that are going to promote that they don’t have an underwriting fee. However, you’re going to pay for it one way or another. Either you’re going to pay it as a fee, or you’re going to pay it as a higher interest rate.
The next line item is your escrows and your prepaids. If you put down more than 20%, you are not required to escrow. However, most people will tell you it’s very advantageous for you. This is because when the tax bill comes out and the insurance bill comes out, you’re not required to reach into your pocket and pay that bill.
Origination Fee
The next line item to expect is an origination fee. This is something that you can choose to pay in exchange for a lower interest rate, and the lender charges the consumer this as a one-time fee.
In some cases, you pay an origination fee because you may be a credit-challenged borrower and it’s the only way that we can get you the loan. Or, it may be that you just want to buy down your interest rate. Origination fees could be tax-deductible for some people, so make sure you talk to your CPA to see if you can write it off.
Knowing What To Expect
I hope this helped you understand some of the fees that you will see on your closing cost statement when you purchase a home. If you have any questions about these fees or any other questions about the home buying process, please reach out to me and my team. We’re here to make the process as easy and stress-free for you as possible.
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