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May 2, 2024
Not only do you need to have enough money for your downpayment and any renovations, you also need to put money aside for your new home’s closing costs.
Closing costs are the legal and administrative costs that you need to pay when you are buying a house. They are separate from your down payment, mortgage, and home insurance costs.
Most of the closing costs are covered by the buyer
Closing costs are somewhere between 2% and 4% of the cost of your new home.
These costs may include:
Loan origination fee: This fee covers any administrative costs associated with processing the mortgage loan.
Appraisal fee: The cost of having the property appraised to determine its value.
Credit report fee: The cost of obtaining a credit report to determine the borrower's creditworthiness.
Legal fees: The cost of hiring an attorney to review the closing documents and ensure that the transaction is legally sound.
Home inspection fee: The cost of hiring a home inspector to assess the condition of the property and identify any potential issues.
Property taxes and school taxes: Prorated property and school taxes for the portion of the year that the buyer will own the property.
Land transfer fees: Fees charged by the local government for recording the transfer of ownership and mortgage documents.
Prepaid interest: Interest that accrues between the closing date and the end of the month.
Title insurance: It’s optional and it is insurance that protects you against challenges to the ownership of your home.
Homebuyers must review their loan estimate and closing disclosure documents carefully to understand all the closing costs associated with their home purchase. Additionally, buyers may negotiate with the seller to cover some or all the closing costs as part of the purchase agreement.
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