Have You Budgeted for Closing Costs?

Saving for a down payment is a key step in the homebuying process, and it’s not the only piece you need to include in your budget. Another factor that is important to plan for is the closing costs required to obtain a mortgage.

What Are Closing Costs?

According to Trulia,

“When you close on a home, a number of fees are due. They typically range from 2% to 5% of the total cost of the home, and can include title insurance, origination fees, underwriting fees, document preparation fees, and more.”

For those who buy a $250,000 home, for example, that amount could be between $5,000 and $12,500 in closing fees. Here in the Twin Cities area, we typically see those fees capping at approximately 3% to 4% on the high side, so your closing costs on that same $250,000 home would likely not exceed $10,000, and can definitely be lower than that as well. Keep in mind, if you are in the market for a home above this price range, your costs could be greater. As mentioned before,

Nationally, closing costs are typically between 2% and 5% of your purchase price, and likely no higher than 3% to 4% in the Twin Cities area.

Trulia gives more great advice, saying,

“The most important thing to read is the closing disclosure, which shows your loan terms, final closing costs, and any outstanding fees. You will get this form about three days before closing since, once you (the borrower) sign it, there is a three-day waiting period before you can sign the mortgage loan docs. If you have any questions about the numbers or what any of the mortgage terms mean, this is the time to ask—your real estate agent and lender are great resources for getting you all the answers you need.”

Bottom Line

Let’s get together to discuss the homebuying process, to be sure your plan includes budgeting for what you need to purchase your dream home – without any surprises.