Preparing for Homeownership: Don’t Overlook Closing Costs
Now that you’ve made the exciting decision to buy a home, it’s time to plan ahead for all the costs involved in the homebuying process. While your down payment might be top of mind, don’t forget about another key expense: closing costs. Here’s a quick guide to help you understand and plan for them.
What Are Closing Costs?
Closing costs are the additional fees and payments you’ll need to cover when finalizing your home purchase. They can vary depending on your home’s price and the type of financing you’re using, but every buyer faces these expenses. It’s just that some people forget to budget for them. According to Freddie Mac, these typical closing costs may include:
- Application fees
- Credit report fees
- Loan origination fees
- Appraisal fees
- Home inspection fees
- Title insurance
- Homeowners insurance
- Survey fees
- Attorney fees
Some of these are one-time expenses rolled into your closing costs, while others—like homeowners insurance—are initial payments toward ongoing responsibilities you’ll manage once you own the home.
How Much Are Closing Costs?
Freddie Mac explains that closing costs generally range between 2% and 5% of the home’s purchase price. For example, if you’re buying a home at today’s median price of $422,600, you could expect to pay between $8,452 and $21,130 in closing costs.
However, if the home you’re eyeing is above or below that price, adjust your expectations accordingly.
Tips To Reduce Closing Costs
Wondering if you can trim those closing costs down? NerdWallet offers a few helpful tips:
Negotiate with the Seller: In today’s market, homes are sitting a bit longer, which gives buyers more negotiation power. Sellers may be more open to covering some of your closing costs, or offering a credit toward them. Don’t hesitate to ask for concessions like having the seller pay for the home inspection or chip in for closing costs.
Shop Around for Home Insurance: With rising home insurance rates in many areas, it pays to shop around. Each insurance company offers different policies, so getting multiple quotes can help you find competitive rates without sacrificing coverage.
Explore Closing Cost Assistance: Just as there are programs to help with down payments, there are also options for closing cost assistance. These programs can vary by region, income, profession, or even specific neighborhoods. Your real estate agent can guide you to available resources, and HUD offers a useful tool for finding homebuying assistance programs in every state.
Bottom Line
Planning for closing costs is essential, but it doesn’t have to catch you off guard. With the right strategies and guidance, you’ll be ready. Let’s connect so I can help you navigate the process and offer expert advice along the way.