Closing costs are an unavoidable expense during the home buying process. While many first-time home buyers know they will have to save up money for a down payment, they may not realize they will also have to pay additional costs. Closing costs encompass payments for numerous services, fees, and taxes involved in purchasing a piece of property. Knowing what to expect from these expenses can help you budget for your new home.
Why Are Closing Costs Necessary?
Closing costs pay for fees and services in addition to the final price of the house. Most of these extra expenses come at the closing of the sale, or when the property title transfers from seller to buyer. Closing costs include unavoidable expenses, such as taxes, as well as some optional and negotiable expenses that will depend on the parties involved in the transaction. Both the buyer and the seller may contribute to closing costs.
Many first-time home buyers think the sale process will only involve them, the sellers, the bank, and maybe a real estate agent. In reality, purchasing a home involves services from many parties, each of whom may charge fees for their assistance. These fees end up in the closing costs of a home, usually coming out to around 3% to 5% of a home’s total value in Idaho. While it may not be possible to avoid closing costs, it is possible to prepare for them as a buyer.
Closing Costs in Idaho
Knowing about how much to expect from closing costs can help you budget and prepare for the home buying process. Although the exact amount will vary, the median closing costs on a home in Idaho is currently $7,000. This is one of the lowest closing costs in the country. The average price of a home in Idaho is $175,000, up about 20% from a historic low in 2011, but less than the market’s peak at $195,000.
The closing costs in Idaho are the second-lowest in America. However, 3% to 5% of the median cost of a home means closing costs can range from $5,250 to $8,750. Knowing how much to expect from closing costs in advance of the closing date can help buyers plan their finances and strategize ways to minimize the costs. Luckily, buyers can receive estimates of closing costs upfront when they apply for mortgage loans in Idaho.
What Closing Costs May Include
“Closing costs” is a blanket term that can include several payment types and cost categories. The majority of Idaho closing costs (about 53%) goes to lender’s fees. These are necessary fees a bank or lender will charge for a home loan, such as application fees, underwriting fees, and attorney fees, in some cases. The rest (about 47%) goes to third-party expenses.
These will vary depending on the situation, but may include:
- Document preparation
- Tax services
- Home appraisal
- Land surveys
- Credit reports
- Home inspections
- Title insurance
- Closing settlement costs
- Attorney fees
- Escrow fees
- Courier fee
- Homeowners association fee
The precise types of fees associated with purchasing a home will depend on the needs of the buyer or seller. Many buyers can try to control their costs by forgoing certain inspections or completing administrative tasks on their own. Some parts of closing costs may be negotiable, while others do not leave room for change. Getting an estimate on closing costs early can help buyers plan and control their expenses.
Are Closing Costs Negotiable?
Some closing costs are non-negotiable, while others may have some leeway depending on the situation. A lender’s fee, for example, is something a home buyer may be able to negotiate with his or her bank. A buyer will receive an estimate of closing fees within three days of applying for a home loan. The estimate should include a breakdown of all fees and services the closing costs include. The buyer will not get a final closing cost amount until three days before the final closing, in a Closing Disclosure statement.
How to Limit Your Closing Costs
When getting a mortgage it is important that you educate yourself on your options and compare quotes from more than one lender. While just going to your local bank, credit union or lender your Realtor referred may sound like a good idea, it can often cost you thousands of dollars at closing or even more over the life of the loan. Not all lenders offer the same rates and lender fees. Searching for lenders to compare online is a great start just make sure you are dealing with a highly rated reputable company.
Another tip is to look for lenders that offer multiple rate and cost options so you can choose the best one that meets your current financial situation. Many lenders will offer large lender credits to cover a big chunk of your closing costs in exchange for a slightly higher interest rate. This is ideal for someone with limited funds or someone that isn’t sure how long they will stay in the property.
Buyers in Idaho get one break in closing costs: no state or county real estate transfer taxes. Most states impose transfer taxes on property deeds, ranging from $0.10 to $2.00 and higher per $500 depending on the laws and the value of the home. In Idaho, the law does not permit any county to impose transfer taxes within the state. In states that do impose this tax, the price is non-negotiable.
Receiving a closing cost estimate early on can help a buyer plan for the total expenses of purchasing a home in Idaho. Avoid hidden fees and unwelcome last-minute surprises by receiving an up-front standardized Loan Estimate form when you apply for a home loan. The second page of your form will itemize the buyer’s closing costs. Section A of the Loan Estimate will reflect all lender fees and is an easy way to compare lenders side by side. If you are getting a lender credit this will show in Section J of the Loan Estimate. If you are unsure what to look for contact one of our professional Loan Officers today. They can compare your existing quote and give you honest feedback on whether it’s a good quote or not.
Have questions? Sammamish Mortgage is a local, family-owned company based in Bellevue, Washington. We currently lend in all of Washington, Oregon, Idaho and Colorado. Please contact us if you have mortgage-related questions.