When you’re planning to buy a home, you’ve already saved your down payment and maybe some money toward closing costs, but there are many costs that homebuyers don’t necessarily plan for, especially first-time homebuyers. Here are 10 common closing costs you should know about, compliments of the National Association of Realtors®.
- Earnest money. This is a 1 to 2% deposit you make to show that you are serious about buying a home.
- Escrow account. If you are putting less than 20% down, your mortgage company may ask for escrow to be sure you have enough money for taxes, mortgage insurance and other related expenses. Escrow is mandatory for FHA loans, and may be required by your lender for other types of mortgage loans.
- Origination fees. An origination fee compensates a mortgage lender or broker for its costs and services. It is usually around 1%, but this varies. When shopping for lenders, be sure to ask what they charge.
- Home inspections. Home inspections are an important part of the home buying process. Consider getting the entire home inspected as well as requesting specialty inspections like radon and pest inspections. Prices will vary.
- Attorney fees. Some states require an attorney at a closing. Though it is unnecessary in most cases, hiring an attorney can be beneficial in extreme situations.
- Credit report. You will likely have to pay the lender for ordering your credit report. Costs are typically in the $30 range.
- Additional insurance. If you are in a flood zone, you may be required to get flood insurance. Know the area where you are moving (or ask your Realtor®), so you can budget accordingly.
- Every home requires an appraisal to determine fair market value. Appraisals vary in cost, but typically range from $200 to $400.
- Title company. The title company charges a fee for doing a title search. Ask your Realtor® or lender for a referral.
- Occasionally, home buyers will want to hire a surveyor to determine where property lines are. Costs vary.
To estimate these costs, talk with your Realtor® and mortgage lender. Thanks to the NAR for this educational information!