Closing on a home is an exciting step but one that often comes with questions. Our realtors typically get a batch of inquiries from prospective condo buyers around closing costs specifically. Folks want to know who pays closing costs, when are closing costs due, and how you avoid unexpectedly not being able to afford them.
Find out answers to these common questions in this guide below..
What are closing costs?
If you’re brand new to home-buying and the corresponding lingo, don’t worry. We are starting with the basics by defining closing costs.
Closing costs are the fees accrued during the home-buying process.
Common costs include lender fees, title search fees, title insurance, attorney’s fee, appraisal fee, recording fees, credit reports, inspections, and agent’s commission.
It’s helpful to note that most of these fees and additional ones fall into one of the following four categories:
- Property-specific costs
- Loan-specific costs
- Mortgage costs
- Property taxes and insurance
Who pays closing costs?
So, who’s dishing out the cash to cover these costs? Well, both the buyer and sellers are responsible for a portion. However, note that the homebuyer generally shoulders most of these fees.
A buyer can expect to pay for the title search fee, title insurance, attorney’s fee, appraisal fee, recording fees, credit report, termite inspection, lender’s origination fee, insurance, taxes, and interest.
On the other hand, the seller should be prepared to fund a portion of the title search fee, title insurance, recording fees, and real estate agent’s commission.
When are closing costs due?
Closing costs typically must be paid on closing day when you sign off for your condo. Hence, why these additional fees are called “closing costs.”
How much are closing costs?
While budgeting for your exact closing costs can be challenging, you can certainly guestimate beforehand by looking at average fees, professional trends, and expert advice.
In Illinois, the average closing costs run around $4,893.99 before tax and $6,529.74 after tax. Keep in mind, though, that homes in Chicago are more expensive than those in other areas of the state. And higher home prices generally mean higher closing costs.
As another helpful rule of thumb, expect to pay roughly two to five percent of the home’s purchase price on closing costs. You can also use online closing costs calculators to help gauge what you would owe in additional costs.
How do you avoid unexpectedly not being able to afford them?
Although it’s hard to anticipate exactly what you’ll owe on closing costs, you can use that two to five-percent rule of thumb mentioned above to reserve an approximate amount of money beforehand.
Consider having more than five percent of the home price set aside just to be on the safe side.
While you can now answer important questions like “who pays closing costs” and “when are closing costs due,” connect with one of our experts if you need additional support during your condo search. We would love to guide you through the exciting process of buying a home!
