Closing costs are a list of charges you will have to pay on the closing date that is set for your home. Many people are surprised at the additional costs over and above the price of the home.
Closing costs will vary from area to area, but a good rule of thumb is to plan for at least 1.5% of the purchase price for closing costs in addition to the down payment. It’s not a bad idea to allow 2.5% for closing costs, just to be on the safe side.
Closing Costs Broken Down
Here are some of the closing costs you may encounter depending on your specific situation. Use this as a guideline then talk with your lawyer or closing agent, who can provide a more realistic estimate for your situation.
Land Survey Fee or Title Insurance Fee
A recent survey of the property is usually required by lenders. If one is not available the cost can range between $600 – $900 for a new survey. In lieu of the survey most lenders today will accept title insurance which can cost considerably less.
An appraisal provides the lender with a professional opinion of the market value of your home. This cost is normally the responsibility of the homeowner and it can cost between $200 and $500.
A professional inspection of the home, top to bottom is for the benefit of the buyer. A home inspection can cost anywhere from $250 – $400 and is well worth the investment. When hiring a home inspector make sure the inspector has liability insurance just in case they overlook something.
Mortgage lenders require a certificate of insurance to be in place from the time you take possession of the home. The amount required is generally the amount of the mortgage or the replacement cost of the home. This cost can vary on the property size, amount of coverage, the insurance company and the municipality.
If your mortgage is insured, you will be required to pay the applicable taxes on the insurance premium at closing. While the insurance premium can be added to the mortgage amount, the tax must be paid at closing, where applicable.
Land Transfer Tax
Most states charge a land transfer tax payable by the purchaser. In NewJersey we call it a Realty Transfer Fee. Land transfer tax is based on the purchase price. First time home buyers purchasing a new or re-sale home may be entitled to a refund.
Legal Costs and Disbursements
Lawyers and notaries charge fees for their services involved in preparing the deed, preparing the mortgage, and conducting the various searches. Disbursements are out-of-pocket expenses incurred during the process such as registrations, searches, and supplies.
An estimate should be made for closing adjustments for bills the seller has prepaid such as property taxes, utility bills, and other charges. Any bills after the closing date are the responsibility of the purchaser. A lawyer will let you know what they are once research has been completed. You will be given what is known as a “Good Faith Estimate” of closing costs prior to your closing so you will know exactly how much money you’ll need to bring to closing.
If you have any questions about closing costs on your home, just drop us a line at firstname.lastname@example.org or leave a comment in the box below.