Closing is the final step in buying a home, and it’s the exciting day when a home buyer finally gets the keys to their new home and can start moving in. Most home buyers are aware that they need to have their down payment ready at closing, but not as many buyers are aware of closing costs. Closing costs are additional fees that need to be paid at closing, so not being prepared can cause big delays. Here is everything home buyers should know about closing costs.
The Cost of Closing Costs
The most important part of closing costs is knowing how much money to have ready in order to pay them. Unfortunately, there’s no way to calculate the exact cost at a glance, so homeowners will need to do in-depth calculations to get the right number. However, home buyers can estimate what their closing costs will be so they can know roughly how much money to set aside. On average, closing costs will be 2-5% of the home’s total cost. For example, if a home is being sold for $200,000, the buyer can expect closing costs to be anywhere from $4,000-$10,000. The exact number will vary depending on a few different factors. For instance, the home’s location and local laws can potentially influence what a home buyer will need to spend on closing costs.
Paying for Closing Costs
One confusion that often occurs regarding closing costs is who pays. In the vast majority of cases, the home buyer is the person who pays for closing costs, not the seller. However, it can be possible to make an agreement with the seller that they pay for the closing costs instead. This is extremely uncommon, however. Sellers already have their own costs that they need to pay for, and very few sellers will agree to take on even more additional costs.
Closing Cost Examples
The term “closing costs” is an umbrella term that encompasses a larger number of different, smaller costs. The exact number of individual closing costs will depend from sale to sale based on how many things the home needs before it can be sold. For example, here are some of the different closing costs that home buyers will need to pay for.
- Appraisal fee: If the buyer is using a mortgage, the lender will require them to have the home professionally inspected to ensure that it’s worth the money they’re being lent, and this fee covers that appraisal.
- Home inspection fee: Before closing, the buyer is given time to have the home inspected to find out if there are any problems that went unnoticed, and this fee covers the inspection.
- Attorney fee: If working with a real estate attorney, they will charge a fee. However, not all states require real estate attorneys.
- Credit report fee: When applying for a mortgage, the lender will take reports from the various bureaus who handle credit scores. This fee is typically only $15-30.
- Homeowners Association transfer fee: If joining a homeowners association (HOA), the buyer will be required to pay the association dues starting at the time of purchase.
These are just a few of the different fees home buyers can encounter, and buyers who want to know more about their exact fees will need to consult their real estate agent.
No one wants to go into a Cypress home closing unprepared, so it’s important to do all the research necessary beforehand. With this introduction to closing costs, home buyers can prepare themselves for closing day.