When you buy a new home, you pay a lot more than sticker price. While you may be able to negotiate a better price than the list price, you have lots of other expenses in store after you agree on a sale price. Here are the biggest costs to expect when buying a new home.
Typical Closing Cost Sources
Expect a laundry list of costs and fees when buying a home. Your bank, real estate agent, title company, third party service providers, and the local government all get a slice of the pie.
The fees are generally not paid out of pocket, and are paid at closing. You can choose to pay them in your closing payment to the title company, or have them added to your mortgage. Here are some common closing costs you can expect to see on your closing statement. You may not have all of them, and there may be others, but these are some of the most common.
Charged by the bank:
- Credit report fee
- Loan origination fee
- Discount points
- Escrow deposit (used to pay taxes and insurance if required)
- Underwriting fee
Charged by the title company:
- Title insurance
- Title search fees
Charged by your agent:
- Agent’s commission (often paid by seller)
Charged by third parties:
- Attorney’s fees
- Inspection fee
- Appraisal fee
- Survey fee if required
- Pest inspection
Charged by the government:
- Recording fee
Closing Cost Amount
Closing costs vary based on the location and your bank, but typically expect your closing costs to be between 2% and 5% of the sale price.
For a $250,000 single family home, you can expect closings costs around $5,000-$12,500. That is a lot of money! For simple math, expect to pay $2,000-$5,000 for every $100,000.
To ensure you can avoid private mortgage insurance charged when you put down less than 20%, you should really save up about 25% of your expected home price for your down payment and closing costs.
Lower Your Closing Costs
Many homebuyers think that closing costs are set in stone. That is not the case by any means. You have a lot of control, and a good real estate agent will help you save money along the way.
To start, shop around for different banks for your mortgage. Not only can you save by finding a lower interest rate, you may also find a bank willing to waive or discount closing costs. Even if they do not advertise it, you should always ask about any possible discounts. Some banks also offer discounts for existing customers, so be sure to include your own bank in your mortgage search.
Some lawyers and real estate agents may be willing to give you a discount if you work with a friend or through a referral. Some agents give a discount to repeat clients or people with professional ties to the real estate or banking community.
For any third party services, you will get a recommendation from your bank or agent. For nearly all of these, you have the right to shop around and pick someone else if you choose. This includes inspections and sometimes the title company.
Get the Assistance of a Trustworthy Agent
Whether you are a veteran home buyer or a first timer, closing costs can be very confusing and are always expensive. Rather than navigate it alone, find a great real estate agent to work with. Start your search for the perfect agent at AgentHarvest. You’ll be glad you did.