What You Should Know About Closing Costs
Before you buy a home, it’s important to plan ahead. While most buyers consider how much they need to save for a down payment, many are surprised by the closing costs they have to pay. To ensure you aren’t caught off guard when it’s time to close on your home, you need to understand what closing costs are and how much you should budget for.
People are sometimes surprised by closing costs because they don't know what they are. CLosing costs are the fees and expensed you must pay before becoming the legal owner of a home. Usually the buyer pays closing costs, however everything is negotiable. Closing costs vary depending on the purchase price and how its being financed.
In other words, your closing costs are a collection of fees and payments involved with your transaction. According to Freddie Mac, while they can vary by location and situation, closing costs typically include:
Government recording costs
Lender origination fees
Tax service fees
How Much Will You Need To Budget for Closing Costs?
Understanding what closing costs include is important, but knowing what you’ll need to budget to cover them is critical, too. According to the Freddie Mac article mentioned above, the costs to close are typically between 2% and 5% of the total purchase price of your home. With that in mind, here’s how you can get an idea of what you’ll need to cover your closing costs.
Let’s say you find a home you want to purchase for the median price of $1,500,000. Based on the 2-5% Freddie Mac estimate, your closing fees could be between roughly $10,000 and $35,000 Keep in mind, if you’re in the market for a home above or below this price range, your closing costs will be higher or lower.
They are also a TON of programs here in California to help assist you with closing costs and down payments. So don't let that number scare you away from buying a home.
What’s the Best Way To Make Sure You’re Prepared at Closing Time?
Work with a team of trusted real estate professionals to understand exactly how much you’ll need to budget for closing costs. An agent, like myself can help connect you with a local lender, and together we can answer any questions you might have.
It’s important to plan for the fees and payments you’ll be responsible for at closing. Let’s connect so I can help you feel confident throughout the process.