Closing Costs When Buying a Home
You find the home of your dreams, pay the seller and get the keys. But, did you know there are other costs to consider?
There are closings costs and other additional expenses that you need to consider which will impact your offer, the size of your down payment, and the amount of mortgage you qualify for.
What are closings costs? Closing costs are the legal fees, administrative costs, and other one-time expenses you’ll need to pay when your house close or at the closing of a real estate transaction.
There are many first time buyers that underestimate the amount they’ll need to cover their closings costs. It’s a good idea that you budget between 3% to 4% of the purchase price of a resale home in order to cover closings costs.
Here are the closing costs when buying a home:
1. Before Closing Day
Property appraisal may be required by the lender to get an estimate of the property’s value and determine whether the selling price is reasonable for the market.
Property survey outlines property boundaries and identifies set backs. It also takes into consideration buildings or other restrictions that can impact the property’s value.
Title insurance protects you and the lender from title fraud, zoning violations, municipal work orders, and other property defects.
Property insurance protects you in case of fire and other disasters. This is required before your lender advances the mortgages funds.
2. Closing Day
Applicable Fees, Taxes & Remaining Costs
The government may charge tax when you buy a home. Therefore, you must pay the following costs: land transfer tax, GST or HST, and property taxes, utilities and condo fees.
Mortgage Default Insurance
You will need mortgage default insurance if you have less than 20% down payment. So if you have less than 20% down payment, the lender will add the premium to the mortgage.
3. After Closing Day
Legal Fees & Disbursements
Your lawyer’s legal fees are considered closings costs, as well as disbursements which include any expenses your lawyer had to pay for work on your behalf.
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