Are you looking to buy a house but want to know how much it’s really going to cost you? In this episode of Rescue Me, I’m going to explain what you can expect to pay in closing costs when buying a new home. By knowing these three main closing costs upfront, you’ll be better prepared when the time comes to make an offer.
Understanding Buyer Closing Costs
Buying a home can be very exciting, but it can also be a little scary. The more you know before you start the process, the better. The one thing you don't want in the middle of buying a home is an unpleasant surprise.
By knowing your closing costs, you can better plan and budget to make a wise financial decision. The truth is that good deals go quickly. Knowing your numbers ahead of time will allow you to take advantage of those good deals without hesitating.
There are three main things you'll be spending your money on when you buy a house. Let's take a look at those three things now.
#1: Money Down
The first cost is the money you put down towards the cost of the house. While this really isn't a closing cost, it will still be leaving your bank account. It's an important part of the budgeting process when buying a house.
#2: Loan Fees, Title Costs, And Prepaid Fees
Your closing costs can be broken down into a few categories: loan fees, title costs, and prepaid fees. Loan fees are what you pay to get the loan from the bank. Title fees are the fees you pay the title company for title insurance, as well as transferring the property into your name. Prepaid fees are things like homeowner's insurance and property taxes that you have to pay upfront. When you go to close the sale, you'll need the cash to cover both the down payment and closing costs.
#3: Appraisal And Inspections
There's one more category of things you'll spend money on when buying a home: the appraisal and inspections. I don't include these in closing costs, since you'll probably pay these fees upfront to the individual inspectors that you hire. An appraisal will typically run between $500 and $800. And the inspections? That just depends on what inspections you'd like done to your house.
How Much You’ll Pay
Now that you understand what you’ll need to pay for, the total cost really depends on the price of your home. For a rough estimate, expect to pay about 2% of the purchase price towards your closing costs. Rest assured, I have a fantastic calculator that will help me determine what your closing costs will be depending on the price of your house. If you'd like a pretty good estimate of what you can expect to pay, you can always reach out to me.
Another thing to note is that the seller can help pay some of your closing costs. While it depends on the market we're in and how things are going, we can have that conversation when we're negotiating and writing up your offer.
I hope this helps you understand what you’ll pay when you buy a house. If you're looking for an agent to help you buy a home in the Sacramento area, give me a call. And remember, when you use me to buy a home, you're also helping a dog get out of the shelter and into their new backyard.