CLOSING COSTS can be mysterious. I’ve had this conversation with buyers many times, so I thought I’d write a *general* post about the matter.
FIRST OF ALL, if the real question is: “How much money do I need to buy this house?” we also need to look at the down payment.
Let’s say you have negotiated a contract to buy a home for $200,000.00, and you are closing July 31, 2014. Here are some generalities about what you will need to complete the purchase:
1. MINIMUM DOWN PAYMENT. Your minimum down payment will depend upon what type of loan you are using to buy the home.
FHA: 3.5% minimum down payment ($7,000 for a $200,000 home)
CONVENTIONAL: 5% minimum down payment ($10,000 for a $200,000 home)
2. “THE CLOSING COSTS”
The closing statement dedicates a whole 8.5 x 14, legal-sized page to closing costs. Here’s a peek (scroll to page 2):
THESE ARE ALL ESTIMATES:
700.00 Origination Fee to Lender
100.00 Tax Certification and Flood Letter
300.00 Interest charges (varies depending on day of month you close. If you close at the end of the month, these are nominal)
1,500.00 Homeowners Insurance for One Year
3,500.00 (1.75% FHA Funding Fee) / $4,000 (Approx. 2% funding fee for VA ~ If certain disability requirements are met using VA loan, this is $0.00) $0.00 for Conventional Loans
2,000.00 Funding of Escrow Account (Will collect several months of taxes and homeowners insurance)
1,300.00 Title insurance and title company fees/recording fees
$5,900 Total Estimated Closing Costs
$15,900 ~ Closing Costs plus Down Payment ESTIMATE
So, the TOTAL NEEDED TO BUY THIS $200,000 HOME LOOKS LIKE THIS:
VA: $5,900 (Although, closing costs can be rolled into a VA loan)
PLEASE NOTE THESE ARE ESTIMATES! THERE ARE VARIABLES, SUCH AS TOTAL ORIGINATION FEES, AMOUNT OF TAXES, ESCROW FUNDING REQUIREMENTS, ETC.
We now have to apply credits you are owed from that number above (again, using amounts for a Conventional loan):
– 1,000 Earnest Money Deposit
– 3,000 SELLER PAID CLOSING COSTS (OR WHATEVER YOU WOULD NEGOTIATE)
– 1,400 Credit for Real Estate Taxes for portion of year Seller Owned Home, @ $2400 for 7 months
APPROXIMATELY $10,500 is what you would bring to the closing table for this Conventional Loan
This $10,500 does not include costs paid for outside of closing, such as your private building inspection costs (figure around $400-450 for building & termite, and add $150 if you’d like radon, too. Another $175 if you’d like to scope the sewer lines, etc.). This also does not include the appraisal fee, which is normally required to be paid outside of closing, for ~ $400.00.
I hope you found this helpful. Have any questions? Please call me!