Congratulations on the exciting decision to purchase your new home!
As part of the purchase of your new home there are closing costs to consider in your budget for your new home. If you are paying for the home all cash your costs are low. If you are using a loan as most buyer’s do, there are costs to keep in mind.
Having a rough idea of your closing costs prior to making an offer does provide you the option of including in your offer the request for the seller to contribute funds towards the closing costs and towards the fees for you to be represented by a real estate agent or Realtor. The seller does not have to agree to the request or may counter the amount requested.
The major part of the closing costs will be related to the lender. When you speak with the lender of choice or if you are doing some comparison of what different lenders are offering, ask for a breakout of the lenders fee’s and their estimate of what the actual closing costs will be. Lenders will provide you a form called a Closing Disclosure to disclose closing costs. This Closing Disclosure was created by the government in 2015 and is required for a lender to use to disclosure closing costs. Not all the charges on the form may be applicable to your loan, some of the closing costs on the form are possibly the sellers and some are rough calculations that will be refined prior to closing to reflect the actual cost. Your Realtor will be able to assist in sorting through the information to assist in obtaining a more accurate number.
Some of the costs you need to plan for beyond the lenders fees and lender established escrow accounts generally for taxes and insurance are:
Home Inspection Fee – Part 1
In this area, the cost of each inspection you have done is traditionally paid prior to or at the inspection. The general inspection done by an experienced and detailed inspector will provide you an overall evaluation of the home. Your insurance company will want two inspection reports – one is called a 4 Point Inspection and the other is a Roof Wind Mitigation Report. The insurance company does not receive the general inspection report or any other inspection reports. Depending on the type of loan you may be requested by the Lender to have a wood destroying organism (WDO) report. Even if the lender does not require it is still a good inspection to have done, As a side note water is a wood destroying organism regarding this report.
Home Inspection Fee – Part 2
Depending on the specific home you have a contract on there may be a need for other inspections which your Realtor will recommend. The general inspector of the general inspection report will, also, help in determining what additional inspections may be needed. Having the right inspector and the needed inspections do have an upfront cost but it can save you a significant amount of funds later if a large issue appears.
Homeowner Insurance
You select the insurance company of your choice. You may want to check with a couple of companies to see who offers you the best pricing and the best coverage.
Appraisal Fee
The lender will require the appraisal to ensure the value of the home is at least equal to the amount of the loan. This is done by a licensed appraiser. Besides confirming the home’s value is at least the value of loan, the appraiser measures the home to confirm the square feet as well as on occasion if the appraiser sees an issue of concern, they will call out the problem to have addressed.
Title Search Fee
Traditional in this area, the cost of the Title Search is split between the seller and the buyer. The seller provides the buyer a Title Policy which includes verifying the seller is the legal owner of the house/property as well as to confirm there are no pending judgments or other claims on the property. The Buyer pays for the Lender’s Title Policy.
Credit Report Fee
As part of the Lender preparing the loan, they will run credit reports.
Buyer’s Agent Fee
As of mid-September 2024, the federal doj implemented a new rule and form that a buyer is required to sign that they agree to pay for their real estate agent or Realtor prior to viewing any homes or property. Your real estate agent or Realtor can provide you more details about the form and options regarding the commission for your Realtor.
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