Closing Costs: What Are They, and How Much Will You Pay?

When calculating the cost of buying or selling a house, closing costs are almost forgotten. However, you do not want to be the buyer or seller taken by surprise by your closing costs. It is vital to plan ahead to ensure that you will have the liquid capital to cover the final expenses of a housing market exchange.

Let’s dive into what closing costs are and how much you may need to pay.

The 6% Rule of Closing Costs

The standard rule-of-thumb for closing costs is between 3%-6% of the home’s selling value. For buyers, this means stacking an additional chunk of change on top of what you have already put into the escrow, down payment,  inspections, and other costs so far. For sellers, closing costs can eat a larger chunk of your profits than expected.

It’s important to be prepared for this 3%-6% expense so that your finances do not take an unexpected hit.

Buyer Closing Costs

As a buyer, you are financially responsible for the entire complex process of handing one property over to another. You will be expected to cover or negotiate to have covered most of the closing costs we are about to list.

• Title Check & Recording Fee

  • The Title Check makes sure there are no liens on the house right before you sign the contract. The Recording Fee is sent to the county or state record office to document that you are the new owner of the property.

• Lawyer Fees

  • Buyers will need a few legal services like paperwork and proofreading done during the buying process. They will help you through the legal steps of taking ownership of a home, and you will settle up with them when everything is done and dusted.

• Escrow Closing Fees

  • Escrow is paid upfront. Ideally, the escrow money comes back to you to pay the homeowner’s insurance and first property tax. Closing the Escrow account, however, may require a processing fee.

• Homeowner’s Insurance

  • Escrow should cover your first month to three months of your homeowner’s insurance policy. But it might not.

• First Property Tax

  • Escrow also typically covers the first month to three months of property tax payments.

• Loan Origination Fee & Underwriting Fee

  • The loan origination and underwriting fees are both fees charged by your lender to complete the final paperwork.

• Mortgage Insurance – FHA or PMI

  • Mortgage insurance insures the lender in case your loan falls through. It is usually required for loans with a down payment or equity of less than 20%

• Courier Fee

  • You may need to use a courier to deliver documents as the home sale comes to a close. If so, the courier’s fee is a closing cost.

• HAO Entry Fee

  • If you have bought a home in an HOA, then the first month may expect the first dues which will feel like a closing cost.

Seller’s Closing Costs

Seller’s closing costs are typically summed up in the duty of paying both real estate agents, an amount that traditionally reaches 6% of the total selling price, and a larger cut from the profits themselves. However, sellers may also face other closing costs as well.

• Real Estate Agent Commissions
  • Real estate agents are traditionally paid 3% of the value of any house they sell. Each. And they are traditionally paid by the seller out of the profits from selling the home.
• Escrow and Lawyer Fees
  • The seller may be asked to pay half of the Escrow release fee, which is a system put in place to protect the seller from loss if a buyer falls through. In addition, there may be other legal closing matters that will require a small lawyer fee.
• Prorated Property Taxes
  • If you have any deferred or remaining property taxes, now is the time to take care of them.
• Recording and Transfer Tax Fees
  • • The taxation and fees associated with transferring the official title records of the property are often paid by the seller.
• Title Insurance Premium
  • The seller typically buys Title Insurance for the buyer. This insurance is fully covered with a one-time payment and protects the buyer against unknown defects in the property.
• HOA Departure Fees
  • Lastly, if you are leaving a home in an HOA, there may be some fees associated with departing as an ex-member.

How Much Are Closing Costs for Buyers and Sellers?

Closing costs are typically estimated at 6% of the final selling price or market value of the home. However, it could be a bit more. Plan your home purchase carefully to ensure your finances are ready to take the plunge. Calculate how much you can afford both in terms of down payment and closing costs before committing to a final price.

Atlantic Home Mortgage is here to help you find the right home at the right price. Contact us today to consult on your desire to secure a home lender.