When you think of the cost associated with purchasing a home, the actual mortgage and down payment are probably top-of-mind – but as you budget for this life milestone, it’s worth considering the other costs associated with closing.
What Costs Do You Owe at the Closing Table?
Once you’ve worked with your agent to find the home that’s right for you, the final step in the process is to actually close on your new home or condo. When you come to the closing table (whether in-person or virtually), there are a few line items you owe as a buyer that might be surprising. These costs vary, but are essentially processing fees you pay your lender.
Generally speaking, closing costs can be anywhere from 2 – 6% of your loan amount. These fees vary by transaction and state; according to Rocket Mortgage, the average closing cost (including taxes) in the state of Illinois is $6,529.74.
While the line items may change depending on your lender, seller and state, these usually fall into a few general buckets.
- Appraisal fee: this fee covers the cost of a professional appraiser who assesses the true value of your new home and ensures it’s move-in ready.
- Home inspection: similarly to an appraisal, a home inspection ensures that the home is in good enough shape to live in. If a home inspection turns up any troubling information, you may be able to renegotiate your contract or even back out entirely.
Loan-specific fees could include an application fee, attorney’s fees and a loan origination fee, which goes directly to the lender for the costs associated with preparing your loan. If you choose to work with a mortgage broker, you’ll owe them a commission (around 0.5% – 2.75%) on your loan amount.
Depending on the nature of your mortgage, some lenders require up-front mortgage insurance and/or application fees. If you’re working with the Federal Housing Administration or Department of Veterans Affairs, you’ll pay guarantee fees to those agencies.
Property taxes and insurance
You can expect to pay a few months’ worth of property taxes at closing, in addition to homeowners association (HOA) fees and insurance premiums. In some cases, you can opt to pay your HOA fee in a lump sum up-front.
Our team is here to guide you comprehensively through the home or condo purchase process, and can answer any questions about closing costs throughout your buying journey. Reach out today to get started or follow the link below to learn more about our process!