What are Closing Costs?
Updated: Aug 16, 2021
As many people know, there are a lot of different costs that go into the purchase of a new home. Some of those costs include "closing costs". But what exactly does that entail? We're here to explain!
Closing costs can vary drastically between each transaction. Whether you're financing or purchasing the property with cash, you will need to be prepared for attorney fees for the title company.
If you're going to be taking out a mortgage, then you also need to incorporate costs towards your lender. What are their processing fees? What are the appraisal or underwriting fees? There are numerous costs related to this portion of it.
Then you have tax prorations. For example, say you're closing on your home on November 1st and the town's property taxes go based off the calendar year. That would mean the seller has (most likely) paid taxes through to December 31st. At the closing, they would prorate those taxes, meaning you would reimburse the seller for the portion of taxes paid between November 1st and December 31st.
You could also owe a small commission towards your #Realtor. To be a buyer client, you would need to fill out a buyer representation agreement with your agent. Within that agreement, there was a set commission percentage. The buyer agent gets paid whatever commission the listing agent has offered them, but if it doesn't equal the amount that's on your agreement, then you would just be responsible for covering that difference. Another example; if you signed an agreement with your Realtor to pay 3% commission but the listing agent is only offering them 2.5% commission, then just the additional .5% commission would come from you as the buyer.
As a general rule of thumb, you can expect your closing costs to be roughly 2-5% of the purchase price on the home. According to Maine Listings, Maine's median home price for the month of June this year was $310,000. If that was the price tag on the home you're looking to finance, you can estimate your closing costs to be somewhere between $6,200-$15,500.
As a Realtor, we will help narrow down these figures even more for you so that you're not surprised at the closing table. We're here to help our clients in any way we can! We have also created a short video to help explain these different factors. Feel free to check it out on our Facebook page by clicking here!