Buying A House? All About Closing Costs

Before a home purchase can be complete, closing costs will be paid. Closing costs can amount to quite a bit of money, and can sneak up on buyers who aren't prepared. Altogether, closing costs may cost as much as 3 or 4% of the sale price of the home. For this reason, it's important to know what closing costs are and when they are due.

For informational purposes only. Always consult with a licensed mortgage professional before proceeding with any real estate transaction.

What You Need To Know About Closing Costs

Closing costs are the administrative fees associated with the sale of a home. Many different entities will charge a fee at the time a home sells, and these fees can vary from one place to another and from one home sale to another. Closing costs do not include the down payment, lenders mortgage default insurance, deposit on the home or the home inspector fee.

What Fees Are Included With Closing Costs

Some closing costs are basically guaranteed no matter who is buying a home and in what area. For example, the legal fees and disbursements associated with the purchase of a home are at least $500 and can be more. Home buyers can shop around for a real estate lawyer who charges the least amount possible. In rural areas, there may be few lawyers to choose from, so fees can vary.

Title insurance is another common closing cost that people must pay. Title insurance prevents loss in the event that an ownership dispute comes up down the road. This can cost as much as $300 but is sometimes less. Land transfer tax is due upon closing of the house. This amount varies from one province to the next and is usually a percentage of the purchase price of the home.

Home buyers are also expected to pay provincial sales tax on mortgage default insurance. Provincial sales tax (PST) varies from one province to the next, so this depends on where the home is being purchased. The cost of mortgage default insurance is added to the mortgage itself, so only the PST must be paid at close.

How to Budget For Closing Costs

Home buyers must have money on hand to pay for closing costs when the time comes. People who aren't sure how much their closing costs will be at the close of escrow can get estimates by shopping around, communicating with their lender and staying in close contact with their real estate agent throughout the home buying process.

Home buyers must also remember when trying to budget for closing costs that they also have other payments to make at the close of escrow. The down payment is one of these costs, and the moving fees is another. Home buyers who are moving into a home that needs repairs or upgrades must also have money on hand for those costs as well. Since budgeting is so difficult, it's important to have a margin of error built into the budget. Home buyers should have at least 10% more than they think they need in order to get through the home buying process.

Contact Your Real Estate Professional For Help

For more information about the Bow Meadows home buying process and to help keep it affordable, work with a real estate professional. Your real estate professional can help you anticipate costs and negotiate an affordable price for your home purchase.

For informational purposes only. Always consult with a licensed mortgage professional before proceeding with any real estate transaction.