Closing Costs: What are they and how much should you budget?
Saving for a down payment is a key step in the home buying process, and it’s not the only piece you need to include in your budget. Another factor that’s important to plan for is the closing costs required to obtain a mortgage.
What Are Closing Costs?
When you close on a home, a number of fees are due. They typically range from 2% to 5% of the total cost of the home, and can include title insurance, origination fees, underwriting fees, document preparation fees, and more.
For those who buy a $500,000 home, for example, that amount could be between $10,000 and $25,000 in closing fees. Keep in mind, if you’re in the market for a home above this price range, your costs could be significantly greater. As mentioned before,
Closing costs are typically between 2% and 5% of your purchase price.
There will be lots of paperwork in front of you on closing day, and not enough time to read them all. Work closely with your real estate agent, lender, and attorney, if you have one, to get all the documents you need ahead of time.
The most important thing to read is the closing disclosure, which shows your loan terms, final closing costs, and any outstanding fees. You’ll get this form about three days before closing since, once you (the borrower) sign it, there’s a three-day waiting period before you can sign the mortgage loan docs. If you have any questions about the numbers or what any of the mortgage terms mean, this is the time to ask—your real estate agent is a great resource for getting you all the answers you need.
Let’s get together to discuss the home buying process, to be sure your plan includes budgeting for what you need to purchase your dream home – without any surprises!
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