How Much to Save for Closing Costs When Buying a Home
Closing costs are an unavoidable part of buying a home. Whether you’re a first-time homebuyer or you’ve been through the process before, it’s important to understand what closing costs are and how much money you should save to cover them. In this blog post, we will break down the basics of closing costs and help you plan accordingly.
What Are Closing Costs?
Closing costs is a term used to describe the various fees associated with purchasing a home. These fees include things like appraisal fees, escrow, title insurance premiums, interest, homeowners insurance, property taxes and more. While closing costs vary from state to state, they can typically range from 2.5% - 3% of the total purchase price of your home.
For example, if you’re buying a $500,000 home in Oregon, you can expect your closing costs to be somewhere between $10,000 - $15,000. It’s important to note that these fees are usually paid at the end of the closing process when all documents have been signed and the deed has been transferred over to your name.
How Much Should You Save?
It’s always better to overestimate than underestimate when it comes to budgeting for closing costs. Depending on where you live and the type of loan you get (conventional or government-backed), your closing cost estimates could be higher or lower than expected. To make sure that you don’t come up short on moving day, it’s best practice to save enough money so that there are no surprises during the transaction process.
As an example for Oregon buyers purchasing a $500K home: If you anticipate needing $12,500 in closing costs; it's recommended that plan for closer to $15K just in case unforeseen issues arise during inspection or escrow negotiations which could increase your total cost significantly above expectations.
Closing costs can add up quickly and take many people by surprise when buying a new home—but that doesn't have to be the case! By doing your research ahead of time and planning accordingly for these additional expenses beyond just your down payment, you'll be able to focus on the excitement of becoming a homeowner without worrying about having enough cash on hand when it's time close escrow on your new property investment! Real estate buyers should save anywhere from 2.5%-3% of their total mortgage amount as an estimate for their eventual closing cost expenses depending on their location in order to ensure they have enough funds available at this critical stage in their purchase journey. With proper planning and budgeting these added expenses don't need to ruin anyone's dream of homeownership!