Know the home buying costs up front!
When you’re buying a home, there a lot of costs to consider beyond just the purchase price. Closing costs can add up quickly and it’s important to understand what they are and how to budget for them! In this blog, we’ll take a closer look at some common closing costs like appraisal, title insurance, and attorney fees and discuss how to prepare for them.
An appraisal is an evaluation of a property’s value. typically performed by a professional appraiser. Appraisal fees can vary depending on the size and complexity of the property, but they typically range from $300 to $500. You may also nee d to pay for additional inspections, such as a termite inspection or home inspection, which can add cost.
Title insurance protects the lender and the buyer in case there are any defects in the title of the property. This includes things like liens, judgments, and unpaid taxes. The cost of title insurance varied depending on the price of the home, but typically can range from 0.5% to 1% of the purchase price.
While not always necessary, hiring an attorney to review the sales contract and other documents can give you added peace of mind. Attorney fees vary but can expect to pay anywhere from $500 to $1,500 or more. It’s important to note that these are just a few examples of the many closing costs you may encounter when buying a home. Other expenses can include things like property taxes, homeowners’ insurance, and mortgage application fees.
So how can you budget for all these costs? One approach is to estimate your closing costs as a percentage of the purchase price of the home. As a rule of thumb, you can expect to pay between 2% and 5% of the purchase price in closing costs. For example, if you’re buying a $300,000 home, you might budget between $6,000 and $15,000 for closing costs. It’s also a great idea to ask your real estate agent or lender for an estimate of your closing costs early on in the homebuying process. This can give you an even more accurate idea of what to expect and help you plan accordingly.
In conclusion, closing costs are an important part of the homebuying process that should not be overlooked. Understanding they types of closing costs you may encounter, such as appraisal, title insurance, and attorney fees, and budgeting for them accordingly can help you avoid surprises and ensure a smooth transaction.
Wichter, Zach. “Closing Costs: What Are They and How Much Do They Cost?” Bankrate, www.bankrate.com/mortgages
Minnesota Homebuyer’s connection (2022) Minnesota Homebuyer’s Connection. Available at: https://mnhomebuyersconnection.com/ (Accessed: March 24, 2023).
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