An often-overlooked expense that you should include in a home buying budget is closing costs.
Closing costs are broken down into five main areas. All closing costs must be fully disclosed by your lender. If there are any changes, the cost must be redisclosed. Keep in mind, closing costs can be paid by the seller if negotiated in the purchase agreement.
Let’s go over the five closing costs to expect.
- Origination charges. These are all the fees your lender will keep for processing and closing your loan.
- Required third party services, such as appraisal, credit report, flood certificate, title services and closing fees.
- Recording fees. These fees cover the amount the county charges to file transfer and lien documents.
- Prepaid expenses, including a one year’s worth of homeowner’s insurance and daily interest for the days left in the month you close.
- Lastly, if you’re escrowing, funds for your escrow account to pay for taxes and insurance will be due at closing.
If you’re shopping for your first home or a seasoned homeowner going through the process again, keep this list handy while calculating your total home budget.