There are a wide variety of costs and fees associated with purchasing a home, closing the deal, and eventually moving in. Unfortunately, the cost of homeownership itself can be rather expensive. Things can add up quickly, from covering your down payment to hiring a real estate lawyer and eventually furnishing your home.
To prepare for these expenses, creating a budgeting plan and managing your costs is a great way to get a handle on things. In addition, having a general idea of what you can afford and what you need to be able to pay beforehand can help alleviate some of the stresses that come with buying a home.
What Are Closing Costs?
Closing costs are the payments and fees affiliated with the sale of a home. There is no set number to prepare for these fees, but it is estimated that 3-5% of the home’s purchase price is used for closing costs. The typical closing costs may include:
Down Payment – The down payment itself represents a portion of the total price you purchased your home for and is paid the day the sale closes. Typically, the buyer will have to organize a loan to afford and finance the rest of the purchase.
Legal Fees – These fees accumulate as you begin to arrange payments for your transaction. You will need to hire a real estate lawyer to draft a title deed, organize and complete the paperwork associated with a mortgage, and contribute to any other administrative costs needed to finalize and prepare your legal documents.
Title Insurance – This insurance policy will protect your property from title fraud, municipal work orders, zoning violations, and other property ownership losses.
Land Transfer Tax – This tax must be compensated to pay the government to transfer the property title from person to person. This tax is based on how much you will purchase the home for, and in some cases, the higher the house price, the higher the land transfer tax will be.
Property Insurance – This insurance policy protects your house and personal belongings from disaster. Evidently, property insurance must be arranged for mortgage funds to be released.