Did You Remember to Budget for Closing Costs?
Buying a home is one of the largest financial transactions most people make in a lifetime. In
addition to saving for the down payment, there are many other costs associated with buying a
home; home inspections, appraisals and escrow fees are considered closing costs and are out
of pocket costs to both buyers and seller. If you are financing the home, then there are
additional lender fees to consider as well.
The Basics of Closing Costs
Closing costs are typically out of pocket costs associated with buying, or selling, a home. Some
loan programs will allow you to “finance” most of these costs by adding the cost to the loan
balance, but it’s important to remember that the home must still appraise for the additional
value and not all programs allow you to do this. It’s better to plan for the extra cost which can
range from 3-7% of the home’s purchase price.
Typical Closing Costs
The full list of closing costs involved in your specific transaction while be outlined on a form
called the Good Faith Estimate (GFE). This will be provided once you have entered the
settlement/escrow period. It will disclose costs associated with concluding the transaction.
You can expect to see items related to loan fees and costs, appraisal, title insurance and
transfer fees, processing and recording fees, hazard insurance and property tax costs among
If you are considering a home purchase, it’s time to speak with a local lender to get a full
understanding of the costs associated with buying a home. In this way, you can ensure you
have saved what you need to close on your dream home.