Everything You Need to Know About New Home Closing Costs

Senior couple with a new home consultant.
  • Written on May 19, 2022 By Stanley Martin Homes

When buying a house, one of the first things you'll need to do is make sure you know how much money you'll need at closing. The total cost isn't just the sales price listed in your contract, there are other fees associated with the services involved in closing on a home. These fees are collectively known as closing costs. It's important to understand what closing costs are to know what to expect and be prepared.

What are closing costs?

Closing costs are expenses that buyers and sellers pay in addition to the purchase price at the settlement of a real estate transaction. Closing costs are a requirement, whether you are buying a home or refinancing an existing mortgage loan. They are generally lumped together in one line item on your closing disclosure which lists your loan's essential details. You'll receive this document within three days before you close on your home, so you have enough time to review it in its entirety.

Your closing costs are broken down into three main categories:

  • Loan Closing Costs:This category encompasses all of the fees associated with having a mortgage. There may also be a line here if you decide to pay points to lower your mortgage interest rate.
  • Tax Closing Costs:This category includes the fees paid to state and local governments to cover property taxes and the transfer of ownership.
  • Insurance Closing Costs: This category comprises the fees related to protecting the parties involved in the transaction.

Some of the notable fees that make up your total closing costs include:

  • Title search and insurance: This cost covers researching the title history of your property and any liens or claims against it; it is usually between $300 and $500.
  • Escrow fees: These fees are generally around 1% (per geographic location) of the price of the home and cover your yearly tax and insurance costs. Your mortgage company will establish an escrow account for you. You will deposit money into the account when you make your mortgage payments.
  • Appraisal fees: A professional appraiser will visit your home to determine its value. The cost for the appraisal may be added to your closing cost.

How much are closing costs?

Closing costs can vary widely based on where you live and what loan type you get. Typically, closing costs fall between two and five percent of the loan amount.

Who pays the closing costs?

The buyer usually pays the closing costs, but you may be able to negotiate the overall amount with the seller. There are some administrative fees that the seller may pay. Stanley Martin Homes offers closing cost assistance to help ease some of the financial burden. There are also government programs available, especially if you are a first-time homebuyer. Contact ustoday to hear about our current incentives.

Whether you're buying a house for the first time or moving up, you'll have to pay closing costs. Understanding closing costs and how they affect your purchase should make your buying process more manageable. Stanley Martin Homes offers several incentives toward financing options, including closing cost incentives to help get you into your new home with confidence. Contact our New Home Consultants today to get started.