Closing Costs Explained
There are three main kinds of closing costs associated with buying a home, and we’ll break down each of them for you today:
1. Pre-paid closing costs. This includes the funds you’ll pay into your escrow account, your insurance, and other preliminary expenses.
2. Down payment. Unlike certain other closing costs, this is one thing the seller cannot pay for you. This payment acts as your initial deposit toward the purchase price. The amount will vary depending on the cost of the home and the type of loan you’re using.
“The amount you put down on a home will vary depending on the cost of the property and the type of loan you’re using.”
3. Miscellaneous closing costs. This includes underwriting fees, lender fees, and other relevant expenses.
So how would these costs break down in a real purchase? Let’s use the hypothetical example of a $100,000 home. If you were buying a home for $100,000 for 20% down, your down payment would be $20,000. Then, assuming your pre-paid expenses and other closing costs added up to $6,000, this means your total closing costs would equate to $26,000. The amount left for your mortgage would then come to a total of $80,000.
We hope this has offered a little bit of clarity. If you have any other questions or would like more information, feel free to give us a call or send us an email. We look forward to hearing from you soon.