A home is a large investment. Most first-time home buyers know that they need to save money to buy a house.
A down payment will put you in a much stronger financial situation which will help you get the best mortgage rates.
What many first-time homebuyers don’t know if they also need to prepare for closing costs when buying a home.
What Are Closing Costs
When you buy a house, there is a lot of paperwork involved in the sale and the transfer of ownership. This period of time is referred to as the closing of the sale, and it involves a lot of closing costs. These are the fees paid by the buyer and seller at the end of a real estate transaction.
Because of the many types of paperwork, there are also a lot of professionals involved in the closing of a home sale. These people include the buyer’s real estate agent, the seller’s real estate agent, the people at the tax office, your appraiser and home inspectors, just to name a few. All of these people need to be paid for their work.
There are also taxes and fees involved in the transfer of ownership. Closing costs will typically include things like appraisal fees, title searches, title insurance, and loan origination fees. A large amount of the closing costs will be taxes.
On average, closing costs amount to 2% to 5% of the purchase price of the home. This will vary based on the size of your loan, tax laws, and the details of your sale. What the buyer pays will also vary because you can negotiate the closing costs with the seller.
What the Buyer Usually Pays in Closing Costs On A House Sale in Utah
So where does all that money go?
According to Finder.com, the average closing cost in Utah, after taxes, is $5,913. Of that amount, $2,817 of that is the average amount of tax paid. That amounts to 47.64% of the closing costs.
An Origination Fee
If you’re buying a home with a mortgage, you will have a loan origination fee to pay to the mortgage lender. Your loan has to be processed. This fee pays for the work of processing your loan with the bank.
You will need to have the home you want to buy appraised. This is a smart thing to do so you know what the home is worth, but also your lender may require this before approving your mortgage.
When you take out a mortgage, the property itself is collateral on the loan. If you stopped making your mortgage payments, the lender would sell the home to recover the cost of the mortgage. They need an appraisal to be sure that the property is worth the amount they are lending to you for the home.
Title insurance will help protect you and the lender against any problems down the line. If there are liens or defects in the title of the property you will be protected against liability for these issues when you have title insurance.
There are typically a few hundred dollars in fees associated with transferring your title. These include courier fees and recording fees.
Earnest Money Deposit
When you make an offer on a home, you will deposit earnest money to secure the deal. This shows that you are serious about buying the home. The money is held in a third party escrow account.
Tips To Lower The Closing Costs When Buying a Home in Utah
There are two main things you can do to lower the closing costs you need to pay when buying a house in Utah.
Discuss your hopes with your real estate agent and they can tell you what they think is likely to happen and work with you to create a deal they can then negotiate with the seller. They may be able to bring your costs down substantially.
There are various programs in Utah state that offer down payment and closing cost assistance programs. If you are a first-time homebuyer, a single parent, or a veteran, you can apply for Utah’s FirstHome closing cost assistance program.
This can help lessen the burden of closing costs, which can make the dream of homeownership much less stressful and more affordable. Don’t be shy about reaching out to these programs and discovering what assistance you may qualify for.
Other Costs to Keep in Mind
As a new homeowner, you will have some new recurring fees that you need to plan for as well. These include private mortgage insurance, homeowner’s insurance, and property taxes.
Homeowner’s insurance will keep you safe from the costs of damage to your home in the case of a natural disaster. Your costs will vary based on your plan and what dangers the insurance company has assessed for your region. In Utah, these will likely be fire and hurricane damage insurance.
Your property taxes will become part of your regular budget. You can pay these monthly, annually, or semi-annually. In Utah, the average property tax rate is 0.688%, but keep in mind that your county taxes can change this percentage, so you will need to check with your county to be sure.
The median home value in Utah of $340,600 would mean you would need to pay $2,343 every year in property taxes.
Prepare For Closing Costs Before You Buy
When compared to the total cost of a home, closing costs may not sound like much money. However, if you haven’t budgeted for these costs, they can be a big hit.
By coming to the table prepared, you can save yourself a lot of stress and headaches that can subtract from the excitement of becoming a new homeowner.
Contact Jackie Ruden Realty Team
Give us a call today at (435) 272-7710 to set up a time to discuss your current and future real estate goals in regards to buying a home or buying a property in trust. We look forward to working with you to make your goals a reality.