What Are the Extra Costs When You Buy a Home?

What You Need to Know About Closing Costs

February 26, 2024

Before you get the keys to your new home, you’ll need to pay the closing costs. They are separate from your down payment, mortgage, and home insurance costs.

They are the legal and administrative costs during the closing process, so that’s why they are called closing costs.

Most of the closing costs are covered by you, the buyer.

For a rough estimate you would like to consider that the closings cost will be somewhere between 2% and 4% of the price of your new home.

Common closing costs may include:

Loan origination fee: This fee covers any administrative costs associated with processing the mortgage loan.

Appraisal fee: The cost of having the property appraised to determine its value.

Credit report fee: The cost of obtaining a credit report to determine the borrower's creditworthiness.

Legal fees: The cost of hiring an attorney to review the closing documents and ensure that the transaction is legally sound.

Home inspection fee: The cost of hiring a home inspector to assess the condition of the property and identify any potential issues.

Property taxes and school taxes: Prorated property and school taxes for the portion of the year that the buyer will own the property.

Land transfer fees: Fees charged by the local government for recording the transfer of ownership and mortgage documents.

Prepaid interest: Interest that accrues between the closing date and the end of the month.

Title insurance: It’s optional and it is insurance that protects you against challenges to the ownership of your home.

How to lower your closing costs:

Check with your bank, if you are getting your mortgage at your bank you can ask for a discount or a waiver.
Check for buying programs incentives by the government, specially if you are a first-time-buyer
Open a First Home Savings (FHSA) tax-free, you can invest up to $8,000 a year (with a lifetime maximum limit of $40,000)

Homebuyers must review their loan estimate and closing disclosure documents carefully to understand all the closing costs associated with their home purchase. Additionally, buyers may negotiate with the seller to cover some or all the closing costs as part of the purchase agreement.

Tips to help save on your home insurance

Increase your deductible to the highest amount you feel can afford
Install burglar alarms and fire alarms/sprinkler systems and make sure your insurance broker is aware you’ve taken these steps to protect your home
Aoid making a claim for smaller things. Slight losses – such as a bike stolen from your garage – can work against you by raising your premiums over time.
If you have a new roof or furnace, make sure your policy reflects the improvements
Ensure the replacement cost of your home and its contents are accurate on your policy. For example, have you sold a big-ticket item that no longer requires coverage?
If you’ve recently downsized your home, your insurance premiums should reflect that
Pay your home insurance premiums annually, rather than monthly
Bundle your home and auto insurance together for a discount

It’s easy to switch your insurance to Western Financial Group and save!