Donโ€™t Get Caught Off Guard with Closing Costs

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Donโ€™t Get Caught Off Guard with Closing Costs

AS a homebuyer, itโ€™s important to plan and budget for the expenses youโ€™ll encounter when you purchase a home. While most people understand the need to save for aย down payment, a recentย surveyย found 41% of homebuyers were surprised by their closing costs. Hereโ€™s some information to help you get started so youโ€™re not caught off guard when itโ€™s time to close on your home.

What Are Closing Costs?

One possible reason some people are surprised by closing costs may be because they donโ€™t know what they are or what they cover. According to U.S. News and World Report:

โ€œClosing costs encompass a variety of expenses above your propertyโ€™s purchase price. They include things like lender fees, title insurance, government processing fees, upfront tax payments and homeowners insurance.โ€

In other words, your closing costs are a collection of fees and payments made to a variety of individuals and organizations who are involved with your transaction. According to Freddie Mac, while they can vary by location and situation, closing costs typically include:

  • Government recording costs
  • Appraisal fees
  • Credit report fees
  • Lender origination fees
  • Title services
  • Tax service fees
  • Survey fees
  • Attorney fees
  • Underwriting Fees

How Much Will You Need To Budget for Closing Costs?

Understanding what closing costs include is important, but knowing what youโ€™ll need to budget to cover them is critical to achieving yourย homebuying goals. According to theย Freddie Macย article mentioned above,ย the costs to close are typically between 2% and 5% of the total purchase price of your home. With that in mind, hereโ€™s how you can get an idea of what youโ€™ll need to cover your closing costs.

Letโ€™s say you find a home you want to purchase for the median price of $350,300. Based on the 2-5% Freddie Mac estimate, your closing fees could be between roughly $7,000 and $17,500.

Keep in mind, if youโ€™re in the market for a home above or below this price range, your closing costs will be higher or lower.

Whatโ€™s the Best Way To Make Sure Youโ€™re Prepared at Closing Time?

Freddie Mac provides great advice for homebuyers, saying:

โ€œAs you start your homebuying journey, take the time to get a sense of all costs involved โ€“ from your down payment to closing costs.โ€

The best way to understand what youโ€™ll need at the closing table is to work with a team of trusted real estate professionals. An agent can help connect you with a lender, and together they can provide you with answers to the questions you might have.

Bottom Line

In todayโ€™s real estate market, itโ€™s more important than ever to make sure your budget includes any fees and payments due at closing. Letโ€™s connect so you have the knowledge you need to be confident going into the homebuying process.

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