Saving for a down payment in preparation for buying a new home is pretty common knowledge. With the mortgage meltdown, most mortgages that allowed zero down payments disappeared. While FHA and VA loans still offer little to no money down, most potential homebuyers will need to save for a down payment.
Unfortunately, many first-time homebuyers are dismayed to learn that in addition to the large down payment, they also owe thousands of dollars in closing costs that they might not have expected. The national average for closing costs which adds considerably to the amount of savings needed to buy a home.
Buyers will be given a breakdown of all fees that will be due at closing so that they can bring a cashier’s check for the right amount or have funds wired.
In addition, while not a closing cost, most lenders also require a savings reserve equal to at least two months of the mortgage payment. Needless to say, it adds up. For buyers, closing costs can be divided into two main categories: costs associated with buying a home and taking out a home loan; and costs associated with owning a home.
Let’s break these costs down. Closing costs include fees charged by the escrow or closing attorney, as well as costs associated with obtaining a home loan, including:
- Notary fees
- Wire fees
- Courier/delivery fees
- Attorney fees
- Recording fees
- State, county, or city transfer taxes
- Home protection plans
- Natural hazard disclosures
- Home inspections
- Escrow fees
- Title search and filing fees
- Lender’s Title Insurance
- Appraisal fees•Home inspection fees
- Fire insurance premium
- Flood insurance (if required in your area)
- Property Taxes
- Mutual or private mortgage insurance premiums
These are just a few of the extra costs associate with buying and closing on a new home. It’s important to know these costs ahead of time, so potential homebuyers can save the appropriate amount of money needed to buy a home. Nobody wants to be surprised by unexpected costs and end up missing out on the perfect property.
Contact me if you would like information about buyer’s obligations when closing on a home.