The 7 Most Important Closing Costs for Buyers

Closing costs affect both buyers and sellers, but buyers have to be extra careful in accounting for them so that they don’t end up paying extra money out-of-pocket. Here are the seven costs that will have the most impact in determining how much money you will need to buy a house:

1. Title Insurance: Title insurance rates in Pennsylvania are what we call “statutory,” meaning that based on the price you pay for the house you buy, the state determines what that fee will be.
2. Loan Fees: These can include things like the origination fee, whether or not you’re paying points or the appraisal fee.
3. Taxes: There are two components of taxes that you need to be aware of when you buy a house. The first is that when you’re closing on the property, if you’re using escrow to pay the property taxes, the bank will ask you to put aside a sum of money at the closing so that when the property taxes are due, the mortgage company has money to pay those taxes. The second component is the tax reimbursements that go back to the seller. The seller will have prepaid taxes for the period of time balancing out the entire year, but they won’t be in the house. You will have to reimburse the seller, then, for the property taxes that they’ve already paid.
4. Transfer Tax: In Bucks County, the transfer tax is 2%. For all practical purposes, this fee is split between the buyer and the seller. If you’re on the buyer’s side, you’re going to incur a 1% fee at closing.
5. Homeowners Insurance: This can be paid outside of closing, but when you settle on a house, you need to pay one year’s worth of homeowners insurance in advance.
6. Prepaid Interest: When you settle on a house, you pay interest from the day you close to the end of that particular month. Your first mortgage payment is then due the following month. It’s this stipulation that explains why you often see more closings toward the end of the month.
7. Miscellaneous: This covers anything unexpected and relatively minor, like recording fees, conveyances, etc.
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There are many closing costs to account for.

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If you have any questions or need a closing cost example for a property you’re interested in, please don’t hesitate to give me a call or shoot me an email. I look forward to hearing from you!