You have been diligent in putting away as much as possible for months now in anticipation of
making a down payment on a new home. The excitement as you start your search is palpable.
Did you remember closing costs? Please say you did. If not, here is a brief primer on what to
Closing costs are actually all fees and/or charges that need to be paid, obviously, when the house
sale is finalized. Buyers and sellers get the honor of paying closing costs, which go to the service
providers involved in making your home owning dream a reality. As buyer, your costs will
typically include appraisal fees, property taxes, homeowner’s insurance, and mortgage insurance.
Sellers usually pay the transfer fees and agent commissions.
As the home buyer, you have the option to negotiate with the seller to cover some of your closing
costs. Depending on the seller’s motivation and financial needs, you may be able to pay less at
the closing table.
Typically 3% to 5% of the purchase price is what you will spend in closing costs as a buyer.
There are a couple of options here – either finance these costs through lender credits or plan
ahead and save for them while you are putting money away for the down payment. Financing the
costs will result in higher monthly mortgage payments, however saving for them will delay your
home-buying journey by at least several months.
Do not let the excitement of owning a new home keep you from disregarding the realities of the
experience. Knowledge and planning is power.