Closing costs are the fees and expenses you pay once you commit to buying a property. Both buyers and sellers pay closing costs, but what exactly they pay for is different. Buyer costs can be in one of two categories: costs associated with buying a home and taking out a home loan and costs associated with owning a home. Usually, buyer closing costs consist of mortgage insurance, homeowner's insurance, appraisal fees, property taxes, and more. Buyers’ closing costs range from 3%-5% of the sale price.
Lenders fees encompass origination fees, application fees, discount points, and prepaid interest. The exact fees and amounts depend on the loan lender, so buyers should shop around and see what lenders offer the best rate.
A home appraisal shares how much your home is worth compared to market value. An appraisal costs a few hundred dollars but could save you thousands.
Homeowners insurance is an annual cost usually paid at the time of closing. In Vermont, the average annual cost is $686, which comes out to a monthly bill of $57.
Private Mortgage Insurance (PMI)
If your down payment is less than 20% of the cost of the property, it is possible you will be required to get private mortgage insurance. This protects the lender if you default on payments.
It’s common for six months of property taxes to be paid in advance at the time of closing. In Vermont, the property tax rate is 1.86% and the typical homeowner pays $4,340 annually in property taxes. The exact amount differs depending on the value of your home.
The closing fee, also known as escrow fee, can be split between the buyer and the seller. Sometimes, one party will pick up the entire fee. It depends on the exact situation and negotiations for which party will pay. The fee goes to the title company or escrow company and covers paperwork, like the recording of the deed and the exchange of funds.
Fees such as credit checks, registering your purchase with the local government, and more could possibly be included in closing costs. The fees are not major costs, but you should be aware that some unexpected expenses may pop up.
Contact Heney Realtors to learn more about closing costs for buyers. We know the central Vermont real estate market and look forward to helping you buy your next home!