People often ask how much money they need to buy a house, and what they mean is how much money do I need to put down beside the mortgage?
However, there are plenty of other costs as well when buying a home. These are referred to as closing costs and you need enough money to cover these as well.
In Pennsylvania, we have transfer tax when real estate is sold, this is generally split equally between the buyer and the seller and depending on the township it can range from 1% each to 2% or more each.
Then you have title insurance, there are two levels of title insurance, one covers the mortgage amount and protects your lender from any claims. Then there is owner title insurance and this has two levels, general and enhanced. The difference is not much between the two in cost, but the enhanced policy does give much greater coverage and increases over time as well. Title insurance rates in PA are set by the state, attorneys can offer a lower discount price, but then their fees may be higher for closing items.
Not only do you have title insurance, but you also have property insurance, now you own a home, you need to protect it from damage, as well as your own property. In fact the mortgage company will insist that you have adequate coverage to protect their investment, the mortgage.
Then at closing you will have property taxes that will be prorated, any home owner dues will also be prorated, and some home owner and condo associations have move in or set up fees when a property transfers, these can be quite sizeable, I have seen some that are six times the monthly fee or more.
There may be some utility costs such as sewer that are also prorated between the buyer and seller as well.
Then you have the deed recording, legal fees for the closing services such as notary fees etc.
As you can see these amounts can add up quite quickly, so it is good to be prepared. We always provide our clients with an estimate of closing costs early on so they are aware of the amounts needed and can adjust their mortgage to make sure they have enough funds for closing.
It is also good to be aware than when purchasing a home, you will often have new items that you purchase for your home that you will need on top of the closing costs as well.
Check with you mortgage provider as often, if you have parents who can help, they can gift you some of the closing costs, but these are subject to different rules so make sure they understand these and that they will have to show the source of the gift funds.
If you need help, contact Nick Vandekar, Selling The Main Line and Chester County with Long & Foster Real Estate Inc., email Nick@VandekarTeam.com, office 610-225-7400, cell or text 610-203-4543.
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