What Closing Costs Really Look Like for Homebuyers

What Closing Costs Really Look Like for Homebuyers

Everyone who has dealt with buying a home and securing a mortgage has been subjected to closing costs, the fees you’re expected to cover out of pocket or roll into your mortgage as you end the closing process on a new home. As a rule, we generally tell buyers to estimate 1.5-2.25% of their purchase price as a total for closing costs.

But while closing costs are de rigeur, have you ever wondered exactly what that money is going toward? For example, did you know that a lot of your fees don’t actually go to your mortgage company, but to third party agencies, local government, and taxes? Below, we have a quick breakdown of some of the most common closing costs – along with estimates of how much they may run you.

Before your closing, it’s extremely helpful to know just what your closing costs will entail, in order to avoid any potential last-second surprises. Make sure you schedule time with your real estate team and mortgage broker to go over the details of your closing costs.

Of course, it’s always smart to go into mortgage talks armed with as much knowledge as possible. Thanks to our friends at Zillow and Baird & Warner, here are a few closing costs to look out for, along with their Chicago price point. These may not all be applicable in your transaction, and we've included a couple costs more typically assessed to the seller - just in case.

  • Attorney's Fees: Attorneys are hugely important for closing a home sale in Illinois, despite being an uncommonly used resource in other states. Real Estate (transactional) attorneys tend to charge a flat fee, not an hourly rate. Expect to pay $400 to $800 in fees for services including legal help, contract negotiation, and more. Ask your prospective new attorney up front to set expectations. 
  • Loan Application and Appraisal Fees: This is the fee paid to the appraisal company to confirm the fair market value of the home. Expect to pay between $250 and 500.
  • Credit Report: Credit scores and reports from free online sites generally don’t carry much weight for mortgage brokers. A tri-merge credit report pulled to get your credit history and score should cost up to $30.
  • Closing Fee or Escrow Fee: Paid to the title company, escrow company, or attorneys for conducting the closing, this fee is generally calculated at $700 on properties estimated up to $100,000, plus $50 per additional $50,000 on properties over $100,000.
  • Survey Fee (more commonly paid by seller in Illinois): This goes to the survey company that verifies all of your new property lines as well as things like shared fences. While not required for most condominium purchases, single family home survey fees may cost between $300 and $500.
  • Lender's Policy Title Insurance: This is insurance to assure the lender that you own the home and the lender's mortgage will be valid; this is calculated from your purchase price, and you can expect to pay between $250 and $500.
  • Owner's Policy Title Insurance (commonly seller's expense for your policy): In a similar vein as lender’s policy title insurance, this policy protects you in the circumstance that someone challenges your ownership of the home. This is calculated from your purchase price based off a rate table. Count on $1,130 for properties priced up to $100,000.
  • Homeowners' Insurance: Insurance that covers potential damages to your home, one years’ worth is often expected at closing, maybe $300 or up. If your loan is more than 80%, you will also be required to pay for private mortgage insurance. 
  • Escrow Deposit for Property Taxes & Mortgage Insurance: At many closings, two months’ worth of property taxes and mortgage insurance payments are expected to be put down. These fees will vary. Technically this isn't a closing expense, as the money is your money, until the county and mortgage company bill you for these costs down the road.
  • Processing Fee: This fee, which reimburses the cost of processing the information on your loan application, goes to your lender. It may cost up to $1000.
  • Underwriting Fee: This fee covers the lender’s cost of research. It may be a line item up to $500.
     

You may also see other itemized costs at closing, ranging from home inspection costs (often paid ahead of time) to home owners’ association costs, which vary from association to association. 

For a better sense of what these fees will look like in the Chicago marketplace, drop Real Group a line! We can help set you up with a gifted mortgage broker and guide you along every step of the home buying process, from the first day of searching to the last day of your closing.

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