Last Updated on December 2, 2023 by growinghome.la
Buying a home is a bit like setting off on an adventure. It’s thrilling, a little bit daunting, and filled with unexpected twists and turns. But don’t worry, I’m here to guide you through one of the less talked about, yet crucial parts of this adventure: closing costs.
What Are Closing Costs Anyway?
When buying a home, there’s more to consider than just the listed price and your down payment. The lesser known costs in home buying, known as closing costs, can be surprising. These closing costs are a vital part of the process, often flying under the radar, but essential to finalizing your purchase.
The Breakdown of Closing Costs
Private Mortgage Insurance (PMI)
As I share in my post about understanding down payment percentages, if you decide to put less than 20% down on your home, you’ll have an additional fee added to your mortgage. This is called Private Mortgage Insurance.
This is your lender’s safety net, protecting them if, for any reason, you can’t pay your mortgage. It’s like an invisible safety harness, keeping everyone secure, and it’s usually included in your monthly mortgage payment.
Title Search Fee
Imagine a detective combing through the history of your future home. That’s what a title search is all about. It’s a deep dive into the property’s past to ensure there are no hidden surprises, like liens or legal issues. This fee is your peace of mind, ensuring your new home has a clean and clear history.
Recording Fees
After your detective (title searcher) gives the all-clear, your home’s deed needs to be recorded. This is like the official social media post announcing your new relationship with your home. Some counties might ask for a little extra for this service, so it’s good to keep an eye out for these fees.
Property Taxes
Ah, taxes, the constant companion of homeowners. When you buy a home, you might need to pay a portion of the property taxes upfront. It’s like a membership fee for joining the homeowner’s club. These vary wildly depending on where you’re planting your roots, so it’s worth doing some homework here.
Home Insurance
Next up is home insurance, your safeguard against the unplanned and unexpected. It’s a safety net for scenarios ranging from storm damage to accidental indoor floods. And for those investing in a condo, be aware that you may need to explore extra insurance options
Other Closing Costs to Consider When Buying a Home
– Appraisal Fees: This is like a reality check for your home’s value. It assures you and your lender that the price you’re paying is in line with the home’s actual worth.
– Loan Origination Fees: This is what you pay your lender for processing your mortgage.
– Home Inspection: This is your home’s full medical check-up, making sure everything is in tip-top shape (or identifying if it’s not).
– Real Estate Commissions: If you’re working with a real estate agent, their hard work in helping you find your dream home comes with a fee, typically paid by the seller. Some agents may even ask you for a small flat fee as part of signing a contract to work with them – like having them on retainer. Note: Don’t sign an agreement unless you’re sure you want to work with them.
How to Prepare for These Closing Costs
– Save Accordingly: Once you’ve got an idea of these costs, start a dedicated savings pot for them. It’s like training for a marathon – preparation is key!
– Shop Around: Just like you would for the perfect pair of hiking boots, shop around for lenders and insurance to get the best rates.
– Negotiate: Sometimes, you can negotiate with the seller to cover some of these costs. It never hurts to ask!
Bottom Line:
Remember, knowledge is power in the journey of homeownership. By understanding closing costs, you’re not just opening the door to a new home, but to a whole new chapter of life, filled with memories, growth, and community. Let’s grow together in this journey of homeownership, one step at a time.
If you want more help throughout your journey, my homebuyer course, The Stress-Free Homebuyer Academy, is here for you. Module 5 is all about creating a strong offer and breaking down the closing process – including closing costs – in detail.
Looking for a quick win? Get clarity on the kind of home you’re looking for with my Map Out Your Dream Home resource. Grab your free copy here!