While saving up to buy your first home in New Jersey, ensure that you account for everything. Did you add closing costs to your budget?
If you have never heard of closings costs, now is the time to change that. Do not let unexpected costs keep you from becoming a happy homeowner.
Definition
Closing costs come with a home’s purchase price to wrap up a transaction. Both the buyer and the seller pay closing costs.
Discount points
With discount points, you can knock down your mortgage’s interest rate. As the buyer, you must purchase these points to enjoy their benefits.
Origination fees
You must pay origination fees when your lender first creates your mortgage. Origination fees total 1% of the loan amount, but you may have the chance to work out a deal with your lender to lower these fees. The more collateral you bring to the negotiating table, the better your chances of reducing these fees.
Appraisal fees
You must pay a professional appraiser to valuate your desired property. Expect to pay anywhere from $300 to $500, but the final price depends on the home’s size, location and type. Even if your real estate transaction does not require a professional appraiser, it is good to get one anyway so you pay fair market value for the home.
Private mortgage insurance
If you do not make a 20% down payment, your lender may require you to pay private mortgage insurance in case you default on your loan. PMI varies from roughly 0.3% to 1.5% of the mortgage amount.
Real estate professionals can help you calculate your expected closing costs. Do not overlook this crucial aspect of owning a home.
