Whether you are buying your first home, trading up or trading down there are many cost on top of the purchase price. It is important to have a clear understanding of what these additional cost will amount to. Being prepared and making sure these extras are in your budget will help ensure that there are no nerve wracking or ugly surprises on closing day.
While most people have little problem figuring out how much they will need for a down payment working out the closing cost is a bit trickier.
Following is a list of most of the major expenses you will have to put out. Always check with your lender for more exact cost. They are required to provide you with a GFE (Good Faith Estimate) within three day of making a loan application.
If you are buying a home in Philadelphia you are looking at a 4% realty transfer tax. This comes from a 3% Philadelphia City tax and a 1% Pennsylvania State tax. This tax is typically split evenly between the buyer (2%) and the seller (2%).
Fees associated with getting the loan: these vary from lender to lender but usually include:
Loan Origination fee (usually 1% of the loan amount)
Tax service fee
Mortgage Application fee
Document preparation fee
Discount points (if applicable)
Fees associated with the title:
Title Insurance (based on sale price)
Items (required by the lender) paid in advance:
Interest 15-20 days
Mortgage Insurance (typically 1 years premium plus an escrow of 2 months)
Homeowners Insurance (typically 1 years premium plus an escrow of 2 months)
A loose rule of thumb is that you prepare and budget for around 4-5% of the purchase price to put towards the closing cost. If this sounds like a lot and a bit discouraging keep in mind that you can always negotiate a “Sellers Assist” A sellers assist is when the seller (as part of the negotiation) agrees to pay all or a part of your closing cost. Many a sale has been made because the seller and the buyer used good sense and negotiated a deal that worked well for both parties.
If you are thinking about purchasing a home in the Philadelphia area and don’t already know a good agent give me a call. I would be happy to talk or meet with you to discuss your real estate needs. If you’re interested in an area that I don’t cover I will be happy to find you an expert in that area!