Many times when clients are considering purchasing a property, they are so focused on the down payment that they forget to take closing costs into consideration. Today I want to take a minute to clarify what the costs of purchasing a home actually are.
First and foremost, buyers should be aware that they are typically responsible for all closing costs. When you purchase a property, you will have to pay lender fees, underwriting fees, and appraisal fees. There are also closing costs associated with escrow, and the lender will have a title insurance policy on your loan.
As a buyer, you are additionally responsible for prepaid property taxes and homeowner’s insurance, which many lenders collect up front. Closing costs can cost you thousands of dollars and usually end up being 1% to 2% of the purchase price.
On top of closing costs, be sure to account for inspection fees. You will always have a general home inspection when you buy a property. Those inspections usually cost between $400 and $600, depending on the size of the home. Keep in mind that the general home inspection may uncover issues that require specialized inspections for the electrical, plumbing, or HVAC systems, which will increase your inspection fees.
Buyers also tend to forget about moving expenses. If you are selling and buying a property at the same time, there may be a transitional period between closing on your current property and getting the keys to your new home. In that case, not only do you have to pay movers, you also may have to put things in storage and find a temporary place to live until your next home is ready.
Finally, you should consider setting aside money to spend on the house after closing. You may want to repaint before you move all your furniture in or buy new furniture. Have some money set aside beforehand.
Don’t let these costs deter you, however. Interest rates are incredibly low right now, which gives you a great opportunity to capitalize on your home purchase. When you work with the right Realtor and the right lender, you will definitely have a successful transaction. If you have any questions, please give us a call or send us an email. We would be happy to help you!