So you’ve found the perfect house, spoken with your lender, and you’re headed toward closing on your new home. You’ve got your down payment ready, but there is another expense that you should plan for when it comes time to sign on the dotted line—closing costs! Even though closing costs are required for almost every home purchase, many people fail to gather these required funds, and may find themselves unprepared. Don’t let that be you! Learn everything you need to know about closing costs below so you can be ready when the time comes.
What Are Closing Costs?
Closing costs are fees that are charged at the end of a real estate sale (excluding pre-paid expenses like escrow accounts and up-front insurance premiums), and are generally paid by the buyer of the home. However, in some cases, you may be able to negotiate for the seller to pay all or a portion of your closing costs. These are generally paid at closing, as the name suggests, and can vary widely based on the property purchased and the services that were needed to help you purchase the home.
What Expenses are Included in Closing Costs?
When you purchase your home, there are many fees, small and large, that you are responsible for as the home buyer. These fees vary based on the property you purchased, but can include:
- Attorney fees
- Inspection charges
- Appraisal fees
- Loan origination fees
- Title insurance and title search fees
- Recording and underwriting fees
How Much Should I Expect to Pay in Closing Costs?
In general, a home buyer can expect to pay 2-5% of the total purchase price of their home in closing fees, so it is a good idea to set aside at least that much in your budget when you decide on a home purchase price. But how can you get a real idea of what your closing costs may be on your particular property? This is where the law is on your side! Three days before the close on the home sale, your lender is required to provide you with a Closing Disclosure statement that enumerates your closing fees. This will help you have a more concrete idea of your total costs at closing, and you can make sure you have the funds ready.
Are Closing Costs Negotiable?
Surprisingly, certain items can be negotiated when you close on your home. Check your Closing Disclosure statement against your Loan Estimate from your lender, and compare line by line. Have your lender explain the costs to you in detail, so you know exactly what you are paying for. In some cases, you may be able to negotiate some items such as origination and underwriting fees.
However, even though some expenses might be negotiable, you should always be financially prepared to pay all closing costs at the time of your home purchase.
If you are having trouble coming up with funds for closing costs, the North Carolina Housing Finance Agency may be able to help. Our N.C. Home Advantage Mortgage™ offers down payment assistance of up to 5% of the loan amount, which can help free up funds to pay your closing costs.
For more information about how the North Carolina Housing Finance Agency can help you become a homeowner, visit www.nchfa.com/home-buyers.