How Much Are Closing Costs When Buying A Home?
What are Closing Costs
When think about buying a home, the first cost you consider is the monthly payment, and how much you can afford instead of paying rent. When buying a home you have up front costs like down payment, and closing costs. So how much will you need for closing costs and what are they, and what do they cover?
Here is a quick answer to help you figure out how much you will need to cover closing costs.
You will want to have any home you are thinking about buying to have a home inspection. The home inspector will check out the home from the structural elements, electrical systems, plumbing, HVAC, furnace and even appliances. They will provide you with a detailed report of the homes condition. Noting any red flags that would be a potential hazard for a home buyer. A home inspection report usually costs $350-$450 and is a part of your closing costs.
Closing Costs are also fees that the mortgage lender charges for preparing your loan. They include a fee for checking your credit, loan origination fees, government recording charges, appraisal fee, to make sure that the home is worth what you are paying for it. Title Service fees, titel insurance, which makes sure that there are no leans on the title. Most buyers can expect to pay 2 to 5 percent of the purchase price in closing costs. On average that would amout to around $3700.
When owning a home you will have to pay property taxes, which are usually included in your monthly payment. The amount of tax depends on the appraised value of the home. Property taxes can go up as the value of your home goes up, even when you have a fixed rate on your mortgage.
If you don’t have enough for 20% down payment you will likely pay mortgage insurance, or PMI. Private mortgage insurance companies pay the mortgage company if you don’t make your mortgage payment.Typicall that is added to your monthly payment, and stops when you have 20% equity in your home. FHA loans are not the same, so check with your lender.
In case your home is damaged or destroyed, your homeowners insurance can cover the costs of replacement or repairs, much like your car insurance. Some homeowners insurance will cover earthquake, flood, fire or hurricane, but you will need to check with your insurace agent as to how much coverage you need.
Both property taxes and homeowners insurance are paid usually in your monthly payment, but need to have monies deposited upfront for several months worth of both to get enough in the account to have money available to pay those bills.
The Good News About Closing Costs
When you find a home you want to buy, you can negotiate with the seller over who pays some of the closing costs. Sometimes the seller will agree to pay some of the buyers closing costs.