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October 3rd, 2019

Common Closing Costs For Buying a Home

When you’re investing in a new property, a buyer’s closing costs include a number of fees and charges you should be prepared to pay leading up to and upon closing. Buyers can expect to pay between 2 and 5 percent of the total home cost. For a home being purchased for $150,000, you can expect to pay between $3,000 and $7,500 in average closing costs. To help you understand where that money goes, we’re breaking down which tasks and fees are covered in the average closing costs for buying a home.

  1. Appraisal

Lenders require an appraisal of the property to ensure the loan you receive isn’t more than the fair market value of the home. The appraisal fee is paid to an appraisal company to determine the value of the home. In some cases, your lender may recommend an appraisal company, but you can choose your own professional property appraiser for the job.

  1. Credit Report

The lender will run a credit report to verify your credit score and review your credit history. This report helps the lender determine your ability to pay back the loan. Your credit score will also play a role in the interest rate you receive on the mortgage loan. A credit report should cost $20 to $3

  1. Closing Fee

The closing fee is given to the title company you choose to close the real estate transaction. This fee will vary depending on the company you choose. The average closing costs will include roughly $500 for your closing fee. The title company is responsible for coordinating the documents needed at closing and getting all parties together to complete the transaction.

  1. Title Search

In order to protect your investment and the investment of the lender, you’ll be required to obtain title insurance. Part of securing that insurance is for the title company to perform a title search. The company will review court documents to ensure there are no liens or holds on the property. The title search will also ensure you do not owe anyone money based on a legal judgement. The search ensures the property is yours with a clean title.

  1. Insurances On Loan

Without a 20 percent down payment on the property, you’ll likely be required to obtain Private Mortgage Insurance (PMI), especially for an FHA loan. With an FHA loan, you’ll also be required to pay out a mortgage insurance premium, included in the average closing costs.

Other types of insurance you’ll pay upfront at closing include flood insurance, homeowners insurance and title insurance. You’ll pay the first year of flood (if required) and homeowners insurance, but title insurance is a one-time fee. There are two types of title insurance – lender’s policy and homeowner’s policy. The average cost to secure both is $1,374.

To better understand the details of average closing costs in Texas, contact the Patten Title Company. Our experienced staff can walk you through the closing process and help explain the value of title insurance.