To create a realistic homebuying plan, make sure you factor in this additional upfront expense so that you can set yourself up for success.
Are you eyeing a home purchase in the near future? Here’s what you need to know about closing costs:
What are closing costs?
Closing costs include several fees, including those associated with originating, processing and underwriting your loan, recording the transaction with your county, appraising your home and more. Taxes and insurance are also part of these expenses.
When do you pay them?
Closing costs are paid on closing day, once your loan is ready to be finalized. You’ll also pay your down payment at this time.
How much are closing costs?
The exact amount you’ll pay will depend on various factors, including your location, loan amount, lender and more, but you can generally expect to pay somewhere between 2% and 5% of your total mortgage balance.
Are there ways to reduce closing costs?
You can reduce your closing costs by shopping around for your lender and title company, asking the seller to contribute, or, in some cases, negotiating with your lender.
Selling a house comes with closing costs, too, so make sure you’re prepared if you’ll need to sell a property before buying your new one.