When preparing for a new home purchase, it’s crucial to plan for the average closing costs for buyer hopefuls on a budget. Closing costs are made up of various service charges associated with the entire home buying process, including appraisals and title paperwork. Because closing costs can add up to thousands of dollars, it’s helpful to prepare for the expense.
Here are some of the most common types of closing costs associated with buying a new home:
Appraisal fee
Appraisal fees cover the cost of a professional home appraisal to determine the value of the property. This cost can depend on the size of your home, but generally comes to somewhere between $300 and $400.
Home inspection fee
Professional home inspection fees usually cost a few hundred dollars. While inspections are technically an optional part of the home buying process, most buyers require them to find out if there are any major issues with a home before buying.
Loan origination fee
Mortgage lenders can charge an origination fee for creating the loan itself. This closing cost can vary from one lender to the next, but frequently comes to around 1% of the amount of the mortgage loan.
Title search
The title for your new home needs to be examined for any possible issues such as tax liens. The fee for a title search is typically between $400 and $500 paid to your mortgage lender.
Title insurance
Title insurance is required by lenders to cover the cost of any issues discovered with the property title. Similar to mortgage insurance, this policy protects the lender rather than the buyer. Title insurance often costs around 1% of the total loan amount.
These are not all the possible closing costs for buyers to prepare for. However, these are the most commonly associated with your new home. Inquire with your mortgage lender for more information about additional fees to prepare your budget accordingly.