Now that you’ve made the exciting decision to buy a home, it’s time to get ready for the financial aspects of the process. While you’re probably focused on your down payment, there’s another expense that’s just as important but often overlooked: closing costs.
Here’s a breakdown of what closing costs are, how much they might be, and a few tips on how to reduce them.
What Are Closing Costs?
Closing costs refer to the additional fees and payments you need to cover when finalizing your home purchase. These fees vary based on the price of the home and the type of financing you’re using, but they’re a standard part of every real estate transaction. Unfortunately, many buyers forget to budget for these costs ahead of time. According to Freddie Mac, closing costs typically include:
- Application fees
- Credit report fees
- Loan origination fees
- Appraisal fees
- Home inspection fees
- Title insurance
- Homeowners insurance
- Survey fees
- Attorney fees
Some of these expenses are one-time costs included in your closing costs, while others, like homeowners insurance, are recurring payments you’ll need to continue after you own the home.
How Much Are Closing Costs?
The amount you’ll pay in closing costs depends on where you’re buying and the price of the home. Freddie Mac notes that, on average, closing costs range from 2% to 5% of the purchase price.
For example, if you’re buying a home at today’s median home price of $422,600, your closing costs would be anywhere from about $8,452 to $21,130. If the home you’re purchasing falls above or below this range, your closing costs will adjust accordingly.
Tips to Reduce Your Closing Costs
You might be wondering if there are ways to bring these costs down a bit. Here are a few strategies from NerdWallet that could help you save:
- Negotiate with the Seller: Since some homes in Brookings may stay on the market longer due to current conditions, sellers might be more willing to cover part or all of your closing costs. You can also ask for credits toward things like the home inspection or repairs.
- Shop Around for Home Insurance: Rising home insurance costs are a challenge in many areas, so take your time comparing rates. Home insurance policies can vary in price and coverage, so getting multiple quotes can help you find the best deal.
- Look into Closing Cost Assistance: There are programs available that can help with closing costs, just like there are programs for down payment assistance. These programs can vary by area and are sometimes based on income levels, professions, or even specific neighborhoods. If you’re interested, your real estate agent can help you find the right resources. As Experian notes:
“Your real estate professional should be able to steer you toward applicable programs, and the U.S. Department of Housing and Urban Development (HUD) maintains a helpful resource for finding homebuying assistance programs in every state.”
Bottom Line
When you're preparing to buy a home in Brookings, SD, it's essential to plan for both the down payment and closing costs. These fees don’t have to be overwhelming if you budget for them in advance and explore ways to reduce the total amount. Having the right experts on your side, like a trusted local real estate agent, will ensure you’re well-prepared every step of the way. Let’s connect today so you can get personalized advice and tips for your homebuying journey.
Posted by Shane Andersen on
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