On average, people stay in the same home for around 13 years before moving to a different one.
Each time you sell a house, you might make some money. You’ll also spend money each time you buy a house. One significant cost of buying a house is the closing costs you must pay.
If you’re ready to move again and buy a new house, you might be wondering how to figure closing costs on a home purchase. Closing costs can add up, and it’s important to plan for them, but how much should you expect to pay?
Here are five of the most common closing costs you’ll pay when buying a home, and you should figure on paying for these.
1. Lender Fees
Before you get a mortgage loan, you might want to ask your lender, “who pays the closing costs on a home sale?” Your lender can give you a breakdown of the costs you will pay and those the seller will pay.
One of the main home mortgage closing costs you must pay is the lender fees. Every lender charges fees for issuing home mortgages, but the fees vary.
One fee you will pay is the loan origination fee, which is often around 1% of the home’s purchase price. Additionally, your lender might charge you for the following things:
- Application fee
- Credit report fees
- Recording fee
- Rate lock fee
- Courier fees
These are among the most common expenses that lenders charge when issuing loans. If your loan requires a funding fee, you’ll need to pay for that, too.
You can pay these costs upfront to your lender if you prefer to keep your loan balance lower. Many loan programs allow you to roll these expenses into your loan, though, so that’s another option to consider.
2. Appraisal and Inspection Costs
Your lender might also discuss the appraisal and inspection fees when you ask, “what are typical closing costs when buying a home.”
Your lender will require an appraisal of the house you’re buying. Lenders need this to verify a home’s value before lending money to someone who wants to buy the property.
You’ll want the appraisal, too, as it helps you pay the right price for a house. The appraisal fee might be around $500, give or take, and it’s a fee you’ll pay as the buyer.
Additionally, you’ll be responsible for paying for all the inspections you want to get. If your lender requires inspections, you’ll pay for those, and you must get them.
You might also choose to get inspections that your lender doesn’t require. For example, do you want a home inspection? If so, you can expect to cover the costs of the inspection. You might also want some of these inspections:
- Pest inspection
- Sewer inspection
- Roof inspection
- Survey of the property
If so, you’ll have to pay these bills, too, and any others that you choose to get.
3. Prepaid Expenses
Home purchase closing costs also include paying for some prepaid expenses. A lot of people forget about these expenses, but they are vital ones that you’ll pay when buying a house.
The first prepaid expense is for the homeowner’s insurance you’ll need for the house.
You might be required to pay for an entire year of insurance upfront, and you’ll likely pay this out of your pocket directly to the insurance company that provides the policy to you.
Next, you’ll have to pay a prepaid expense for the escrow account you’ll have with your loan. An escrow account helps you save money to pay your upcoming property taxes and home insurance.
You might also have to pay for the interest on your loan that accrues from the closing date to the day your first payment comes due.
4. Attorney Fees
Next, you might incur some attorney fees when buying a house, and these are also considered closing costs. Hiring an attorney is optional when purchasing a home, but many people hire one for the benefits.
When you hire a real estate attorney for help, the attorney can do various things for you. First, they can help you create the purchase offer for the home. When doing this, they’ll help you write it in a way that protects you.
Secondly, your real estate attorney can assist with the inspections and appraisal. Your attorney can do numerous other things, but you’ll incur a bill for the services.
A real estate closing attorney cost breakdown might be around $1,000, but it could be less than this amount, depending on what the lawyer does for you.
5. Title Fees
Finally, you’ll have title fees to pay when closing on a house purchase. You will have two main types of title fees to pay.
First, you’ll have to pay a title company or attorney to complete a title search on the home. A title search tells you who owns the house and if the home has liens on it. It also tells you if the title has defects.
Secondly, you will buy a title insurance policy. This insurance policy protects the title of the home. If you encounter problems with the title in the future, you can file a claim on your title insurance policy.
So, now you might understand the answer to, “how much does closing cost on a home?” You can learn more by speaking with your real estate agent and lender if you have further questions.
Talk to Your Lender to Learn How to Figure Closing Costs on a Home
You can talk to your lender to learn how to figure closing costs on a home. Your lender can provide you with a document that shows every expense you will have to pay when buying a house.
Closing costs are a standard part of the home-buying process, so you should expect to pay these costs when purchasing a house.
If you enjoyed this article, you might like others on our blog. Check out the rest of our site today to learn more about the home-buying process.