Buying a home can be a wonderful experience. But, it’s best not to spoil that experience with unexpected closing costs.
What are closing costs? Basically, these costs are expenses incurred when you buy or sell a home. Here is a definitive list of closing costs every first-time home buyer needs to be aware of before taking the plunge.
Calculate Closing Costs
On the day you close or a few days before, you will be given several documents to sign. Among these documents is your roadmap to closing costs: the closing disclosure statement. This statement outlines all of the expenses–and who pays for them–involved in the home sale.
This document will contain your full down payment, loan origination fees, the cost of home inspections/appraisals, deed recording, notary fees, private mortgage insurance premium if your lender requires it, and prorations.
What are prorations, you may wonder?
Seller Vs. Buyer Prorated Expenses
On the other hand, home buyers may be owed prorations in some scenarios. For example, if the electric company sends a new homeowner a bill for the previous month, and the seller had occupied the house during that previous month, the seller would then owe the home buyer the difference for the energy they used. The closing cost statement should outline the specific number of days each person was the owner of the home.
Up Front Property Taxes And Insurance
These closing costs can even vary depending on where you live, as you’ll see next.
Closing Costs By Location
In about 20 states, a lawyer is required to close on a real estate transaction. Even if your state does not require a lawyer to handle the transaction, you may choose to do so anyway. Either way, this will bump up your closing costs even more. Fun fact: In California, real estate closings are handled through escrow companies usually chosen by the seller.
Some Closing Costs Can Be Negotiable, But Not Many Of Them
Happy home buying!