Here are the four primary closing costs you should know as a homebuyer.
When buying a home, there are other fees you must be prepared to pay besides the down payment. Here are the four big-ticket items to budget for:
1. Lender fees. These are the fees that come with getting a mortgage, and they’ll vary depending on which mortgage you secure (conventional, FHA, jumbo loan, etc.). Due to this, there’s no precise number you can expect to pay, but you can ask your lender to get a good idea.
2. Attorney fees. Massachusetts is an attorney state when it comes to real estate closings, meaning we don’t use title or escrow companies. Your attorney will represent you from the purchase sale agreement all the way to closing. If they represent the lender, the fee may be reduced slightly. In any case, you should expect to pay $800 to $1,200. Again, it will vary depending on the situation.
3. Title charges. Since we’re an attorney state, the attorney acts as the title representative, so title charges will include attorney fees, lender title insurance (which is mandatory), and owner title insurance. Owner title insurance exists to ensure that the title and deed are recorded correctly with the county. If and when you sell the property down the road, the title insurance will cover the costs incurred to correct the title. There are other charges you can expect to pay, but they’re primarily smaller fees.
4. Inspection fees. Inspections aren’t mandatory, but they’re highly recommended. The only instance where you’d waive the inspection is if the home you’re buying is highly sought-after and you just want to make sure you have the best offer with the least number of contingencies.
Buyers are responsible for these fees because Boston is a very competitive market, but there are certain cases—if the home’s been on the market for a while, for example—where they can be negotiated. You can also ask the seller to either cover or split the total closing costs.
If you have to cover a fee you overlooked, you can raise your purchase price after the offer is made and ask for a credit back at closing. If your closing costs total $3,000, for instance, and the purchase price of the home was $500,000, you can ask the seller to raise it to $503,000 and ask them for a $3,000 credit.
Remember to discuss these fees with your agent during your initial meetings so you’re not caught unaware. As always, if you have questions about this or any real estate topic, don’t hesitate to reach out to me. I’m here to help.