arhome realty blog

a breakdown of buyer closing costs

Preparing for a home purchase can be daunting - but it doesn't have to be. Know what to be prepared for so you can make a strategic plan. Don't forget to budget for extra closing costs that come on top of your down payment. Get an estimate from your lender and make sure you know what to expect before you set your home price range.

Here's what buyers should expect at a closing:

1. down payment

This is the money that the home buyer pays upfront for the property. Down payments are usually a percentage of the purchase price and typically range from around 3% to 20%, but there is no limit to how much you are allowed to put down.

2. lender fees

Lender fees are the cost of processing your loan, such as appraisals, credit checks and loan origination costs. These fees should be transparently disclosed in the closing disclosures. Some fees can be negotiated, while others can't.

3. closing + title

These are the costs of the closing service and any title insurance requirements on the buyer's side, as required by your lender, the contract you sign or your personal choices regarding title insurance. This can sometimes vary depending on the purchase price of the home.

4. prepaid interest

This interest is for the days you own the house before your first payment. These are due at the time of closing.

5. home insurance premium

The first term of your homeowners insurance needs to be paid at or before closing.

6. escrows

If you're making arrangements for your lender to handle your tax and/or insurance payments, the lender will probably collect a few months up front for that. But depending on your county's tax schedule, you should be getting a credit for tax money from the seller at closing.

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