Estimating Your Out Of Pocket Closing Costs

Budget 2%-5% of your purchase price in cash beyond your down payment. On a $250,00, that’s roughly $5,000 to $12,500 for earnest money, inspections, appraisal, and closing costs combined. Outside of closing fees, your loan type and down payment size are major factors in the cash you need to close. A VA loan buyer with a 0% down payment and an FHA buyer with 3.5% down will see very different numbers than a 20% down conventional buyer.

Here’s where that money goes.

Earnest money is the deposit that shows a seller you’re serious once your offer is accepted. In this market, 1% of purchase price is most common: $1,000 on $100,000 house, $2,500 on a $250,000 house, etc.

This money isn’t exactly fee. Instead, it goes into an escrow account held by the title company or a mortgage broker and applies toward your down payment and closing costs at close. If the deal falls through for a reason covered by your contract’s contingencies, you get it back. If you walk way from the purchase for a reason not covered by those protections, the seller can keep the deposit.

The price of a whole-house inspection varies somewhat by square footage, but costs approximately $500-$700 in St. Joseph County. Most inspectors require payment before they produce their inspection reports, though some allow buyers to pay at closing for an additional fee. This is a cost you take on during your inspection period, after the seller accepts your offer but before closing.

A whole-house inspection is always a good idea before making what is for most people the largest purchase of their life. The inspector will inspect all major systems of the house from top to bottom – inside and outside, attic to basement. Whole house inspectors are reliable generalists, who will conduct inspections that are broad but not especially deep.

Specialty inspections (radon, sewer scope, well, septic, HVAC, electrical) cost extra and are ordered separately from general inspections. These costs can vary depending on the inspection required, but a good rule of thumb is to anticipate an additional $200 for each additional specialty inspection.

Your lender orders the appraisal from an independent appraiser to confirm the home is worth what you’re paying. Costs can vary, but a you should estimate $500-$750.

This fee is paid directly to the appraiser or lender before closing, separate from your other closing costs, and typically within days of the seller accepting your offer.

This is the biggest number on the list and the most negotiable, depending on the details of your loan.

• Conventional Loan: 5% down with PMI (private mortgage insurance) or 20% down to avoid PMI
• FHA Loan: 3.5% of purchase price. FHA buyers should also plan to pay the Upfront Mortgage Insurance Premium (UFMIP) as a closing cost. This charge is 1.75% of your total loan amount (not the purchase price!).
• VA Loan: As low as 0% down for eligible veterans and service members.

PMI on a conventional loan under 20% down adds to your monthly payment, not your closing costs. But it’s worth running the numbers up front to make sure that you’re making the best financial decision for your situation.

Yes, in most cases. Your lender requires proof of homeowners insurance before closing and you will need to keep the home insured over the entire life of the loan. Buyers usually pay the first year’s premium upfront. From then on, home owner’s insurance payments roll into your monthly payment with your lender paying for you through escrow. You should shop around and make sure to obtain a favorable quote within your homeowner’s insurance contingency window. If you’re really ahead, you may want to shop rates even before you’re under contract.

“Closing costs” is a catch-all for lender fees, title fees, insurance costs, and brokerage administration fees due at closing. As a rule of thumb it’s a good idea to plan to pay 2-3% of purchase price for these combined costs. But you don’t have to estimate long! Your lender will send you a Loan Estimate within 3 days of application that breaks down these costs. Your lender will also send a Closing Disclosure a few days before you close to finalize things and notify you of any changes since the time of estimate.

Since we pay Indiana property taxes in arears, Sellers usually give buyers a credit for all current calendar year taxes prorated on a calendar-year basis as of the day immediately prior to the Closing Date.

Depending on the terms of the purchase agreement, Sellers often agree to credit Buyers toward agent representation fees or other lender-approved closing costs.

Neither, to be precise. Earnest money is a deposit held in escrow that gets credited back to you at closing. It’s not an additional expense on top of what you already owe. However, you should be prepared to make the deposit in 2 business days or less after the Seller accepts your offer.

Yes, if the deal falls apart for a reason your contract protects: a failed inspection contingency or financing contingency, for example. If you back out for a reason the contract doesn’t cover, the seller is entitled to keep it as liquidated damages.

They can be. Whether the Seller is likely to agree to concessions depends upon market conditions and the Seller’s specific situation. But these concessions are negotiated as a term of the offer and are subject to loan program limits. Depending on your loan type, you may be able to get the Seller to contribute up to 3% or 6% of the purchase price toward closing costs.

It depends on your loan. VA loans allow 0% down for eligible buyers. FHA allows as low as 3.5%. Conventional loans typically start at 5%, though some first-time buyer programs can go even lower. The HomeReady and HomePossible grants, for example, can help qualified buyers put as little as 3% down. It’s not unheard of for buyers to walk away from closing with a check by the time they pay their earnest money deposit, close, receive their loan, pro-rated tax credits from the Seller, and concessions.

Plan for 2%-5% of the purchase price beyond your down payment, covering earnest money, inspection, appraisal, and closing costs. Get pre-approved before you start house hunting! Your lender can give you exact numbers based on the loan program and price range of your choice.