Closing costs are one of those things that when everything about buying a home can be stressful, it seems to add one more unpredictable variable into the mix. What are closing costs? What should you know about them? We got your back. Here’s everything you need to know about closing costs so that you have the knowledge and confidence you need to make smart decisions.
What Are Closing Costs?
Closing costs are all the fees you typically pay to close a real estate transaction, from the day you sign the contract until you receive your keys. In most cases, a home buyer pays for these costs – but not always. This include all the expenses including:
- Down payment
- Closing fee (title company)
- Home inspection fee
- Title insurance
- Appraisal fee (if you’re using an FHA loan)
How Much Will You Need To Budget for Closing Costs?
According to the Freddie Mac article, the costs to close are typically between 2% and 5% of the total purchase price of your home. But we know that figure can vary widely depending on your situation.
Here are some factors that will impact what you’ll need to budget:
- How much money you have saved up for a down payment
- Your credit score and debt-to-income ratio (the lower these numbers, the more you’ll pay in closing costs)
- The sale price of the home you’re buying (the more expensive it is, the higher your closing costs will be)
Keep in mind, if you’re in the market for a home above or below this price range, your closing costs will be higher or lower.
What’s the Best Way To Make Sure You’re Prepared at Closing Time?
Work with a team of trusted real estate professionals to understand exactly how much you’ll need to budget for closing costs. An agent can help connect you with a lender, and together your expert team can answer any questions you might have.
The closing costs for obtaining a mortgage loan and paying for your house can come as a shock to first-time home buyers. These should not be overlooked. It is vital that you’re aware of all the costs involved in purchasing and owning a home, especially since they can vary widely depending on the lender and the nature of the loan itself. Moreover, it’s a good idea to have a general understanding of these costs, so you can prepare accordingly. If you’re looking for a new way to save money when buying a home, reaching out to us at 616.893.6478 for assistance can be very useful.