Buying a home is a significant investment, and it can be an overwhelming process for first-time homebuyers. You may be surprised to know that your down payment isn’t the only major expense to plan for when buying a home. Closing costs are expenses associated with buying a property. They are typically paid by the buyer at the closing, which is the final step in the home buying process. What are these costs, how much should you expect to pay, and how can Foyer help?
Some common closing costs include:
Appraisal fee: An appraisal is an assessment of the value of the property, and the fee covers the cost of the appraiser's services.
Title insurance: this protects the buyer and lender from any issues that may arise with the title to the property. The fee covers the cost of the insurance.
Inspection fees: Home inspections are crucial to identifying any potential issues with the property, and the fee covers the cost of the inspection.
Attorney fees: An attorney may be necessary to review and prepare legal documents related to the sale.
Recording fees: These are fees paid to the county to record the transfer of the property.
Transfer tax: Some states and counties charge this tax when a title is transferred from the seller to the buyer. Your real estate agent will know if this is something that the seller typically pays for or if you are responsible since this may depend on your region.
How much should you expect to pay in closing costs?
Closing costs can vary depending on the location, the purchase price of the home, and other factors. However, a general rule of thumb is that closing costs typically range from 2% to 5% of the purchase price. For example, if you are buying a home for $300,000, you can expect to pay between $6,000 and $15,000 in closing costs.
How can you prepare for closing costs?
It's essential to budget for closing costs in addition to a down payment before you start the home buying process. Speak with your lender or real estate agent to get an estimate of the closing costs you can expect to pay. You may also be able to negotiate with the seller to cover some of the closing costs.
How does Foyer help?
Foyer’s homebuying accounts allow you to save more funds to be used for both your down payment and closing costs. Your Foyer account will automatically calculate an estimate of your cash needed to close on your home before talking to one of our partner real estate agents or lenders. Click here to join our waitlist as we prepare our launch this summer!