Wednesday, February 5, 2020 / by Marketing Dude
Buying a new home is a very exciting time, but has anyone walked you through what your closing costs will be? Buying a house without knowing how much you’ll pay in closing costs is like painting your house without knowing the color! Being aware of typical closing costs in Minnesota will give you the most clarity and power when it comes to negotiations. The best deals will go quickly, so knowing what your closing costs will be ahead of time is key to be prepared to act fast.
It’s important to note that your closing costs will come as an addition to your down payment. Closing costs are simply part of doing business, and you’ll need an estimate to know the total amount of money you’ll need to complete the sale.
Below are 4 types of closing costs you can expect to pay to complete your home purchase.
Home Inspection Costs. It’s extremely important to get an inspection on the house you’ve agreed to purchase. Since you’re making such a huge investment, you want to make sure everything is in working order and there are no hidden issues that could pop up later. A professional inspector will assess your property, looking at things like the heating and cooling system, plumbing, foundation, and other key areas.
If the inspector finds any item that needs attention, you can either ask the seller to give you a credit for necessary repairs or request they be repaired at their expense. An inspector’s fee will vary depending on who you hire and the size of the home and is due at the time of inspection. Expect to pay a minimum of $350 for peace of mind regarding your purchase.
Lender Fees. These fees are related to your loan and include your home’s appraisal, loan, mortgage insurance, and similar costs. You should receive a Good Faith Estimate (GFE) that will estimate and outline your closing costs, and you’ll want to make sure you go over this with your lender. Ask questions now to make sure there are no surprises later.
Remember that, while no one likes fees, many of these costs benefit you directly. The appraisal fee, for example, is issued by your bank and ensures you don’t overpay for your new house. An appraisal usually costs around $450 and will need to be paid upfront.
Title Fees. Your closing will be finalized at a title company, and their fees will be part of your closing costs. The title company is the place where the title/deed is transferred from one owner to the other. They provide a safe place where all your money will be wired in and where the transaction will be closed. You should receive a title disclosure form that outlines the title company’s current rates; you should set aside between $1,000-1,500 for these fees.
Transfer Taxes. When you purchase a property, you’ll have to pay taxes at closing relating to the transfer of the home from one party to the other. Each city has its own transfer tax rate, which you can easily look up to get an idea of what you’ll be paying. For example, Minnesota’s transfer tax rate is 0.33% of the sale price. If you paid $280,000 for your new home, then your transfer tax fee would be $924. Make sure you know this cost ahead of time so you’ll have no additional surprises at the closing table.
Your lender will be able to provide you with a Truth In Lending Act Disclosure, which will break down all of the closing costs with a fair amount of accuracy. Using this guideline, you’ll be better prepared for all of the expenses that you’ll need to account for when you buy a home. Every situation is different, so if you need any additional help, don’t hesitate to reach out to me with any questions you may have!