Understanding Buyer Closing Costs

Most people who are in the market for a new home are aware of the costs associated with purchasing a home and moving, but closing costs can be expenses that may be overlooked, especially for first-time home buyers.  The amount of the closing costs will depend on where you live, the type of home you are purchasing, and the type of mortgage you are going to carry, but in most cases they can equal anywhere from two to four percent of the purchase price of your home.  So before planning your home purchase budget, here are some hidden expenses that you may want to include.

In general there are two types of closing costs, recurring and non-recurring.  Recurring costs include things like fire and flood insurance, property taxes, and mortgage insurance; these are expenses that will have to become part of your monthly budget and in most cases are often anticipated by new home buyers.  Non-recurring costs are one-time costs that are associated with closing a home purchase, and in most cases make up the bulk of extra expenses.  Non-recurring closing costs usually include:

Title Policies
Escrow
Wire Fees
Delivery
Attorney Fees
Endorsements
Recording
Transfer Taxes
Home Protection Plans
Natural Hazard Disclosures
Home Inspection
Lender Fees

Depending on your particular circumstances, the actually closing fees may include just a few of these costs, or even include ones that are not listed here.  Purchasing a home is a huge investment and expense, and getting a clear picture of the cost before signing your name on the dotted line is important.  Your REALTOR® can usually give you a detailed list of these expenses.