What Closing Costs Will I Need to Pay When Buying a Home?

 Posted on February 19, 2021 in Real Estate

If you are planning to buy a new home, you will need to address a wide variety of issues, including securing financing and resolving any concerns uncovered during a home inspection. As you work to complete the necessary requirements to obtain approval for a home loan, you should be sure to understand the various costs that you may be required to pay at the time of your home closing. This can help you avoid any unexpected financial issues and ensure that you will be able to move into your new home without any problems.

Understanding Closing Costs

There are a variety of services performed when finalizing a mortgage, and homebuyers will usually be required to pay the related costs before they can complete the closing process and take ownership of the property. Closing costs may include:

• Home appraisals and inspections - A lender will usually require a home to be appraised to verify that its value is similar to the amount of the loan. Buyers can perform an inspection to determine whether there are any defects on the property or repairs that will need to be made. Fees for appraisals and inspections will often be several hundred dollars.

• Loan fees - A lender may charge application and loan initiation fees of $100 or more. Loan origination or underwriting fees may also apply, and these will usually be around .5% of the total loan amount. Buyers may also be able to pay discount points that will allow them to reduce the interest rate of the loan.

• Title insurance - Lenders will require buyers to obtain a loan policy that provides protection if property ownership issues arise during the closing process. An owner’s title insurance policy will also provide the buyer with protection, and in Illinois, the seller is responsible for paying for the owner's policy.

• Private mortgage insurance (PMI) - A lender may require buyers to obtain this type of insurance if their down payment is less than 20% of the home’s purchase price. The first monthly PMI payment will be due at closing.

• Property taxes and local fees - Buyers will usually be required to pay any property taxes that apply from the date of closing through the end of the applicable tax year. Cities or states may also charge transfer taxes or other fees, and a homeowner’s association may require buyers to pay transfer fees and annual dues.

• Homeowner’s insurance - Lenders will usually require buyers to pay the premium for the first year of this type of insurance policy.

Buyers will usually be required to pay all closing costs. However, when negotiating a purchase agreement with the seller, buyers may ask sellers to cover some of these costs.

Contact Our Libertyville Real Estate Attorneys

By working with an attorney during the home closing process, you can determine the best ways to minimize your closing costs and address any other issues that may affect the transaction. At Newland & Newland, LLP, we will answer your questions and advise you of how to protect your rights, and we will work to ensure that you can complete your transaction successfully. Contact our Lake Forest real estate lawyers at 847-549-0000 to set up a free consultation today.

Sources:

https://www.nerdwallet.com/article/mortgages/closing-costs-mortgage-fees-explained

https://www.bankrate.com/mortgages/what-are-closing-costs/

https://www.investopedia.com/mortgage/mortgage-guide/closing-costs/