Buyer Closing Costs
This is a question we get often from clients and agents - “what will my closing costs be?” That answer is unfortunately not simple, and depends on some factors, but we break down some common fees and this post can be a good basis to understand closing costs.
Purchase using a Lender
When purchasing a home using a lender, we can break the closing costs into two buckets - we will call them “Lender Costs” and “Transactional Costs.”
Lender Costs
These are heavily dependent on which lender you select, some charge an origination fee, you may elect to “buy down the rate,” and other costs come in like appraisals and flood certifications. Ask your lender for an estimate of their fees to be certain. The lender will often require you to escrow property taxes and insurance, so they have some initial contributions to your escrow account at closing to capitalize the escrow account. These fees may seem like “closing costs” but in reality they are really prepayments for future expenses.
Transactional Costs
To break this down, we will build a list:
Settlement Fee - this is the fee the closing attorney collects for their services. Our standard fee is $950, but we offer discounts for military, first responders, and teachers (inquire about your discount from us)
Title Insurance - Lenders always require a Lender’s Policy of Title Insurance, and you should always get an Owner’s Policy of Title Insurance as well (this is a one time cost at closing and the policy never has to be paid again and does not expire). Title insurance is a cost based on your purchase price, so the more expensive the home, the more expensive the title insurance costs. We can often get you a discount if there is a recent prior title insurance policy we find - below I will give some examples of title insurance costs assuming no discount, so this is a good estimation of how expensive it could be (but it is likely less - this calculator is helpful):
$350,000 purchase price, $325,000 loan amount: Lender’s Policy would be $867.50 and Owner’s Policy would be $78.50
$500,000 purchase price, $475,000 loan amount: Lender’s Policy would be $1,182.50 and Owner’s Policy would be $78.50
Homeowner’s Insurance - Once you select your insurance carrier, you will have to pay a year of insurance up front at closing (as noted above, you will contribute some escrow funds, that is to pay for next year’s policy renewal)
HOA - if you are purchasing a home in a neighborhood with an HOA, there may be fees associated with such at closing, some common closing costs for HOAs:
Capital Contribution: This is a one time fee at closing the HOA charges to capitalize their account, and each person who purchases pays this fee when they buy; the amount depends on the HOA, some are as low as $150, some are as high as $2,000, ensure you have a good understanding of this cost prior to contracting so you aren’t surprised at closing. Some HOAs do not charge this fee
Prepaid Terms: Some Associations charge some time at closing so they have time to get you set up in their system, it is common to have tho pay two months of HOA dues/assessments (different names for the same thing) at closing
Insurance Contribution: If you are buying a townhome or condo, the HOA generally maintains a master insurance policy for the exterior and common areas. Some HOAs roll this amount into regular dues, some charge it separately, again, ensure you have a good understanding of this cost prior to contracting so you aren’t surprised at closing
Inspections/Other - A lot of these types of things are paid outside closing, but if you intend to have the closing attorney pay for inspections and repairs at closing, those can contribute to costs. Home Warranties are in the same bucket here - can be paid at closing, typically between $500 - $700 for a year of coverage if you purchase it.
Recording Fees - you will typically pay $26 for the deed to be recorded and $64 for the deed of trust to be recorded, and most of the time the vendor for electronic recording charges a small fee that may be passed on to you. For the most part that is $10, some counties use a different system and it could be as high as $50. If you have additional documents to be recorded at closing, we can quote you for those, but it is typically $26 plus the e record fee for each document (like a POA).
Property Taxes - In North Carolina, property taxes are billed annually and are for the period of January 1 - December 31. The tax bills are released (no later than) September 1 of the current year and are not considered late if paid by January 5th of the following year. As an example, 2023 taxes will be due and payable September 1, 2023, but you will be considered on time if you pay on or before January 5, 2024. This explanation of timing matters. As a buyer, if you purchase prior to the tax bill being paid for that calendar year, you will likely get some money from the Seller for their contribution to the taxes in the form of a proration at settlement (since they owned for part of the year but they cannot pay yet). If you buy after the Seller paid the taxes for the year, you will have to contribute your pro-rated share of the tax bill for the year at closing to the Seller on the settlement statement. Some Counties do not collect for cities, so if you purchase in an area that the city collects separate, the same rules apply just add city fees. Consult your local County tax office for an estimate of the taxes for the year (last year’s tax bill will be pretty close, your contract has your parcel ID number on it, that is the number the tax office will use to identify your property)
Other fees - if you are doing a remote closing, or need additional documents drafted, additional fees will come into play, here is a breakdown of common expenses we see:
Overnight Fees: we pass the overnight costs on to you if we have to overnight documents, it is typically $50 each time it happens
Mobile Notary Fee: we prefer to coordinate and bring a notary to you if you are not local for signing, this person will print the loan package, bring them to you, notarize them, and overnight them back to us, making a remote closing very easy. This is $250 for mobile notary services.
Power of Attorney: we charge $75 to prepare a power of attorney and this will need to be recorded (see above)
Mobile Home - if the property contains a mobile home, the process of affixation can cost additional, plan on adding at least $250 to closing for mobile home charges (if they apply)
Purchase using Cash
Here, we just have transactions costs because there is no lender involved:
Settlement Fee - this is the fee the closing attorney collects for their services. Our standard fee is $850 for a cash closing, but we offer discounts for military, first responders, and teachers (inquire about your discount from us)
HOA - if you are purchasing a home in a neighborhood with an HOA, there may be fees associated with such at closing, some common closing costs for HOAs:
Capital Contribution: This is a one time fee at closing the HOA charges to capitalize their account, and each person who purchases pays this fee when they buy; the amount depends on the HOA, some are as low as $150, some are as high as $2,000, ensure you have a good understanding of this cost prior to contracting so you aren’t surprised at closing. Some HOAs do not charge this fee
Prepaid Terms: Some Associations charge some time at closing so they have time to get you set up in their system, it is common to have tho pay two months of HOA dues/assessments (different names for the same thing) at closing
Insurance Contribution: If you are buying a townhome or condo, the HOA generally maintains a master insurance policy for the exterior and common areas. Some HOAs roll this amount into regular dues, some charge it separately, again, ensure you have a good understanding of this cost prior to contracting so you aren’t surprised at closing
Recording Fees - you will typically pay $26 for the deed to be recorded and most of the time the vendor for electronic recording charges a small fee that may be passed on to you. For the most part that is $5, some counties use a different system and it could be as high as $50. If you have additional documents to be recorded at closing, we can quote you for those, but it is typically $26 plus the e record fee for each document (like a POA).
Title Insurance - In a cash purchase, title insurance is optional, but you should always get an Owner’s Policy of Title Insurance (this is a one time cost at closing and the policy never has to be paid again and does not expire). Title insurance is a cost based on your purchase price, so the more expensive the home, the more expensive the title insurance costs. We can often get you a discount if there is a recent prior title insurance policy we find - below I will give some examples of title insurance costs assuming no discount, so this is a good estimation of how expensive it could be (but it is likely less - this calculator is helpful):
$350,000 purchase: Owner’s Policy would be $857.00
$500,000 purchase: Owner’s Policy would be $1,172.00
Property Taxes - In North Carolina, property taxes are billed annually and are for the period of January 1 - December 31. The tax bills are released (no later than) September 1 of the current year and are not considered late if paid by January 5th of the following year. As an example, 2023 taxes will be due and payable September 1, 2023, but you will be considered on time if you pay on or before January 5, 2024. This explanation of timing matters. As a buyer, if you purchase prior to the tax bill being paid for that calendar year, you will likely get some money from the Seller for their contribution to the taxes in the form of a proration at settlement (since they owned for part of the year but they cannot pay yet). If you buy after the Seller paid the taxes for the year, you will have to contribute your pro-rated share of the tax bill for the year at closing to the Seller on the settlement statement. Some Counties do not collect for cities, so if you purchase in an area that the city collects separate, the same rules apply just add city fees. Consult your local County tax office for an estimate of the taxes for the year (last year’s tax bill will be pretty close, your contract has your parcel ID number on it, that is the number the tax office will use to identify your property)
Homeowner’s Insurance - Once you select your insurance carrier, you can elect to pay a year of insurance up front at closing, though in cash purchases this is often handled outside of closing