You’re ready to buy a home. You’ve saved and saved for your down payment and done your research on market conditions. But have you factored in closing costs?
As the Chicago Tribune once put it, “the list price is just the tip of the iceberg” when it comes to buying a home. There are also many common fees and expenses, known as closing costs, that some homebuyers tend to overlook until later on in the process.
These closing costs, which you’re expected to cover out of pocket or roll into your mortgage as you end the closing process on a new home, are part and parcel of the homebuying process. Many home experts say to anticipate spending about 2% of your purchase price as your total for closing costs; the Tribune suggests that buyers should budget as much as 5%.
Closing costs run the gamut, and cover payments not only toward your mortgage company, but also third party service providers, taxes, and your local government. These costs are fairly standard, and it’s important to go into the purchasing process knowing what to expect.
While every transaction is different,and prices will vary, here are a few typical closing costs to prep for as you look into buying a home in Chicago:
- Loan Application and Appraisal Fees
Typical buyers may expect to pay between $250 and 500 for these fees, paid to the appraisal company to confirm the fair market value of the home.
- Attorney’s Fees
Real estate attorneys are a vital part of the homebuying process in Illinois, handling everything from document review to contract negotiation and more.
- Closing Fee/Escrow Fee
The settlement of escrow closing fee goes by a few names. In any case, this refers to what is paid to the title company, escrow company, or attorneys for conducting the closing
- Lender’s Title Insurance
Calculated from your purchas price, this is insurance to assure a lender that you own the home and the lender’s mortgage will be valid.
- Homeowner’s Insurance
The cost of homeowner’s insurance, which covers potential damages to your new home, will vary based on a number of factors. Often, one years’ worth is often expected at closing.
- Escrow Deposit for Property Taxes & Mortgage Insurance
These fees will vary from transaction to transaction, and sometimes, may be credited from the seller. In any case, in many closings, buyers are expected to be able to put down two months’ worth of property taxes and mortgage insurance payments, to be held in reserve he county and mortgage company bill you down the road.
- Processing Fee
This fee goes to your lender, for the purpose of reimbursing the cost of processing the information on your loan application. It may cost between several hundred dollars, up to $1000.
- Underwriting Fee
This line item covers the lender’s cost of research for the purposes of underwriting your loan.
- Document Prep/Recording Fee
Bear in mind that this list is by no means comprehensive, and your closing costs will vary, depending on any number of circumstances.
One important thing to remember? During the closing process, you’ll want to surround yourself with a knowledged and experienced real estate team – including an attorney who knows what it takes to fairly and efficiently carry off a transaction in Illinois.
The attorneys and staff of The Gunderson Law Firm specialize in helping individuals and businesses in the state of Illinois with real estate transactions insightfully, promptly, and professionally. Drop us a line with any questions, or to set up your free initial consultation.