As the market continues to pick up in Connecticut, buyers and sellers are putting homes under contract. This exciting step always invites the question: What are my closing costs?
Buyers and sellers have their own fees at closing. These fees pay for the services and documentation involved in new owners taking over a property.
Buyer Closing Costs
The bulk of closing fees for buyers come from obtaining a mortgage. As a buyer, expect to pay between 2-5% of the purchase price of the home in closing costs. These may include:
- Appraisal. The fee for the appraisal of the home is paid to the appraisal company.
- Home inspection. Buyers typically pay for the home inspection, which takes place before closing day.
- Insurance. Homeowners’ insurance and title insurance are often paid for at closing.
- Application Fee. This covers the cost of processing a loan request, include credit checks.
- Origination Fee. This fee, also known as an underwriting fee, covers costs for preparing a mortgage loan.
- Private Mortage Insurance (PMI). If PMI is required for your loan, the first month’s fee is paid at closing.
- Escrow Fees. Escrow fees, usually split between the buyer and seller, go to the escrow service that holds funds until closing day.
- Attorney Fees. These fees pay for the review of closing documents on behalf of the buyer.
Seller Closing Costs
Closing costs for sellers come primarily from the title changing hands. Sellers can pay up to 7-10% of the sale price of the house. Closing costs for a seller include the following fees and taxes:
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- Agent Commissions. The agent commission fee is typically split between your listing agent and the buyer’s agent. If you are selling your house on your own, you may still need to cover the commission of the buyer’s agent.
- Transfer Tax. The transfer tax, or conveyance tax, includes transferring the title of the property to the new owner. In Connecticut, both state and municipal conveyance tax fees are paid by the seller.
- Title Insurance. Title insurance protects the new owners from any liens or homeownership disputes, and is typically paid for by the seller.
- Escrow Fees. Escrow fees, usually split between the buyer and seller, go to the escrow service that holds funds until closing day.
- Attorney Fees. Many states require an attorney for closing day.
- Credit toward closing costs. In some purchase agreements, sellers offer the buyer credit toward closing costs. If this is part of your agreed-upon contract, it will be included in your closing costs.
Buyers and sellers will receive documentation of exact closing costs a few days before the closing takes place. Set money aside for these fees, and be sure to review all items before closing day.