Buying a home is an exciting process for many people. They can’t wait to move in and have probably spent the last couple weeks deciding their home budget. As you begin figuring out the costs and start thinking about which mortgage you want to apply for, don’t forget to factor in one additional cost to the home buying process: Closing costs. Don’t let the excitement sweep you off your feet where you forget to include these costs in your budget. Prepare in advance by learning what closing costs are and how much you can expect to pay around Columbus, OH.
What are Closing Costs?
When you obtain a mortgage, you will need to pay closing costs on the home you’ve bought. They are typically fees charged by lenders and 3rd parties related to the home purchase. They are often charged at the closing phases of the real estate transaction, hence the name “closing costs.”
What Charges go into Closing Costs?
Closing costs can vary depending on where you live and what type of property you are buying, but they typically include fees such as:
- A fee for running your credit report
- Loan origination fee
- Attorney’s fees
- Home inspection & appraisal fees
- Title insurance (which protects the lender in case the title isn’t clean)
- Title search fees (for a background check on the title)
- Escrow deposit
- Recording fee (paid to the city for recording new land records)
- Underwriting fee (covers the cost of evaluating a mortgage loan application)
How Much Can You Expect to Pay?
2-5% of the home’s purchase price typically equals your closing costs. For example, if you’re buying a home in New Albany for $150,000, you might pay between $3,000 and $7,500 in closing costs. On average, home buyers in the Columbus area usually pay around $3,700 in closing costs.
To help give you an idea of what closing costs you will have to pay, lenders are required to give you a good faith estimate (GFE) of what they expect closing costs will be. They should give you this estimate within 3 days of when you apply for a loan, but remember this is only an estimate. Many of the fees listed on the GFE can legally change up to 10%, potentially adding thousands of dollars to your final closing cost bill.
How Can Buyers Avoid Closing Costs?
It’s important to note that some of the fees associated with closing costs can be negotiated. When you receive the final bill for your closing costs, compare them to the GFE your lender gave you. Then ask for an explanation of what each of them is for and see if you can negotiate any. Oftentimes, some of the closing cost fees can be totally unnecessary, such as high administrative or mailing costs.
Another way to avoid paying closing costs on your home purchase is to negotiate with the home seller. If they are desperate to sell their home, they may be willing to sweeten the deal for you. Talk with your agent and the homeowner about getting them to pay some of the closing costs.
Buying a Home in the Columbus, OH Area
Closing costs are not a deal breaker. When buying a home in the Columbus area, make sure you factor these costs into your budget before solidifying a deal. That way, your home move will be as smooth as it can be.