When you decide to purchase a house, you need to be aware that there are many costs outside of the actual price tag of the home. From the down payment to the cost of a home inspection, you’ll need to set aside some of your budget to cover these costs. One type of cost you’ll need to plan for are closing costs. Closing costs must be paid at the time of the final settlement. The following information can help you understand what’s involved in these costs.
💲 What Are Closing Costs?
Closing costs are the fees that are applied to your home purchase at the time of the closing transaction. The costs are paid at the time of the closing settlement—when the seller transfers the property title to the buyer. Closing costs may be paid by the seller, buyer, or by both parties. Closing costs can vary depending on where in the country you’re purchasing a home. The value of the home can also impact the closing cost. If you have questions about the closing costs associated with any property or real estate transaction, your real estate agent will be able to explain the fees involved.
💵 What Are Closing Costs Based On?
Closing costs can be based on various things such as the type of loan you have. If you’ve only put down a minimum down payment, you might be required to pay private mortgage insurance. If you are going through the VA for your loan, you might have to pay associated funding fees. Closing costs might be based on services required for the home’s survey or inspection. You may need to pay for professional services such as the cost of an attorney. Some lenders, for example, require buyers to contract with an attorney who will review the home contract. Closing costs can be different for different deals. Your lender, attorney, and real estate agent can typically provide you with a list of fees you’ll be responsible for at closing time.
💰 What Are Typical Closing Costs for Buyers?
There are many different fees that can be assessed for a closing. However, usually a deal will only involve a few closing costs. Some of the most common closing costs include an attorney fee if your deal is being reviewed by an attorney. An application fee for processing your application is sometimes applied at closing. An escrow fee may be required to pay the title company. You may be required to pay an up-front mortgage insurance premium depending on the type of loan you have. You may be charged a home owners association fee or the first year’s home insurance costs.
Other common closing costs include a lead-based paint inspection, origination fee, owner’s policy title insurance, prepaid interest, private mortgage insurance, property taxes, a title company search fee, recording fees, a survey fee, underwriting fee, transfer tax, and a VA funding fee if you have a VA loan. Since you’re not likely to be charged all these fees, you don’t have over worry the issue. However, talk to your real estate agent so you won’t be surprised about what you owe at closing time.
✂️ What Closing Costs Are Tax Deductible?
In most situations, home buyers will only be able to deduct a couple closing costs. For instance, they can deduct mortgage interest and real estate property taxes for the property. If you itemize your deductions, these may be deducted on your taxes in the year that you purchase or build your home. Keep in mind that real estate deductions aren’t always a breeze to navigate. You should make a point to consult with an experienced accountant when doing your taxes. There may be advantages for you not to itemize your deductions; however, you can only deduct your closing costs if you itemize. Your accountant can help you determine the best course for you.
As you can tell, closing costs can be as tricky to determine as the house buying process. For most deals, the costs are relatively easy to determine. An experienced real estate agent will be able to provide you with all the information you need to close on your deal and pay the associated costs. The key is to learn about these costs well in advance of the closing date so that you are prepared to pay them. The seller will also have closing costs. You real estate agent can also discuss what the seller is required to pay so that you have a full picture of the final transaction.
Your real estate agent is the best source of information about the local community and real estate topics. Give Simmsational Real Estate Group a call today at (954) 709-8258 to learn more about local areas, discuss selling a house, or tour available homes for sale.