Buying a home is an exciting time, something you’ve possibly saved toward for years. However, beyond the down payment there are a variety of other costs involved in buying a home. So, before you put an offer on a home, review these costs, because if you’re unaware of these costs you may have to go into debt to pay for them or negotiate with the seller to cover some of these costs.
Table of Contents
Origination Fees
These are the fees you’ll pay your lender and include the application fee and underwriting fee. These are usually standard fees and are the administration fees that cover the cost of gathering documentation and verifying that you can afford to purchase a home.
Earnest Money Deposit
In addition to the down payment, you may also need to pay an earnest money deposit to show the homeowner that you’re serious about buying the home.
Attorney Fees
A real estate transaction is a legal transaction more than anything else since the ownership of the home is exchanging hands. As a result, you will always need to pay attorney fees when buying a home.
To save on this cost, you may want to use an attorney that charges a fixed rate.
Escrow Services
Your fees can be divided into two segments: prepaid fees and escrow fees. The amount paid into escrow usually covers the cost of homeowners insurance and property taxes while the home’s ownership is being transferred.
Homeowners Insurance
Generally, when you purchase a home, you will need to prepay some of the home insurance, usually for 12 months. The amount you pay will depend on the value of the home you’re buying.
Taxes
When buying a home, you will need to pay a transfer tax. This tax is assessed based on the value of the property and funds the transfer of the property’s ownership into your name. Unfortunately, there isn’t a way to reduce transfer tax unless you choose to buy a cheaper home or move to a state with a cheaper transfer tax.
What is the Total of These Costs?
The exact figure you spend on closing costs as a buyer will depend on the price of the home and the state you’re buying in. However, you can expect to pay between 3% and 6% of the home’s value in closing costs.
The Reason Using a Closing Cost Calculator is Important
While these are the most shocking –– and expensive –– fees you’ll encounter when purchasing a home, there are a dozen of smaller fees, like postage, survey fees, and a title search. For that reason, you should use a closing cost calculator for buyer.
The closing cost calculator you use should go into detail about each fee you will pay. A great example of this would be Smart Asset and Houzeo. Both of these closing cost calculator break down each element based on your state and your state’s requirements. For example, a closing costs calculator California buyers would use would differ from a closing cost calculator Texas buyer would, which gives you the most accurate results.
