Understanding Closing Costs: A Buyer’s Checklist
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조회 4회 작성일 26-01-08 15:30
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When purchasing a home, many first-time buyers focus primarily on the purchase price and monthly mortgage payments, but there is another critical set of expenses that can significantly impact your budget—closing costs. These represent the unavoidable costs incurred when finalizing your homeownership agreement and locking in your financing. They can add up to thousands of dollars, so understanding what they are and what to expect is essential. Use this detailed checklist to anticipate every fee, plan your finances, and walk into closing with confidence.
One of the largest components of closing costs is the loan origination fee. This fee compensates the lender for evaluating, documenting, and approving your loan request. It typically amounts to about half a percent to one percent of the total loan amount. Even if you think you’re getting a no-fee loan, the fee could be baked into your monthly payment, so always ask for a clear breakdown.
Another significant expense is the appraisal fee. A certified appraiser must assess the home’s current market value to ensure the loan is secure. This ensures the property is worth the amount you’re borrowing. Appraisal fees generally range from between $300 and $550, depending on the location and size of the home.
Title services are also mandatory. The title professional examines public records to ensure the seller holds clear, unencumbered title. You will also need to purchase title insurance, which safeguards both parties against disputes over legal ownership. Your lender insists on lender’s coverage, and while you can choose not to get owner’s coverage, it is a wise safeguard for future peace of mind.
Government recording fees are charged by local authorities to officially record your deed and mortgage in public records. These fees vary by county but usually come to roughly $200 to $500. Similarly, transfer taxes may be imposed by your state or local government when ownership is transferred from the seller to you. These taxes are often calculated as a percentage of the sale price and can add up quickly in high-tax regions.
If you’re getting a mortgage, you’ll likely need to pay for a credit check fee, which covers the cost of obtaining your FICO score. There may also be underwriting fees, which compensate the lender for Best real estate agent Peterborough assessing your ability to repay the loan. Additionally, you might encounter courier or wire transfer fees for sending documents securely.
Prepaid items are another category you’ll need to account for. These include escrowed property tax payments, homeowner’s insurance premiums for the first year, and per diem interest from closing to month-end. Your lender will estimate these amounts and collect them at closing, placing them into a trust fund to be paid on your behalf later.
Home inspection fees are not technically part of closing costs, but they are often paid during the final stages of the transaction. While not required by lenders, you should absolutely schedule one to uncover potential repair needs. Fees typically range from between $350 and $650.
Finally, don’t forget about moving expenses, which, while not a closing cost per se, are an immediate financial obligation that follows your purchase. Planning for these costs early helps ensure you’re not caught off guard after you’ve already moved in.
To stay in control of your budget, ask for a Loan Estimate within 72 hours of your application. This document provides a good-faith estimate of your closing costs. Then, three days before closing, you should receive a Closing Statement that lists the actual charges. Review both side by side to ensure all numbers match your initial estimate.
It’s also worth asking the seller if they’ll cover part of your settlement fees. In some markets, it’s typical for sellers to pay closing costs, especially in a negotiation-heavy region. This can significantly reduce your out-of-pocket expenses.
Closing costs can be overwhelming, but with planning and clear communication, you can navigate them confidently. By reviewing each line item, asking questions, and planning ahead, you’ll enter your new home not just with keys in hand, but with financial clarity and peace of mind.