Finish Line: A Guide for First-Time Home Buyers on Closing Costs

If buying your first home is a race, then closing the deal is the finish line. You started confidently, overtaking several other participants in the race and pulling ahead with your offer. You completed the circuit by gathering all necessary documentation, submitting a mortgage application, and conducting home inspections. Now the finish line is ahead.

Crossing the finish line requires endurance, determination, and a lot of support. In this article we'll talk about some things you should know about closing costs.

Real Estate Lawyers

Real estate legal services are an important part of the home buying process. A good real estate lawyer will draft agreements, sign and notarize legal documents, complete the transfer of ownership, close your mortgage loan, and ensure all deadlines are met to avoid delays in the deal. They serve as an invaluable source of help for first-time home buyers.

Luckily, today you can find quality online real estate services at a lower price than traditional firms. Virtual lawyers provide all the best services you expect from a prestigious downtown firm, but with a guarantee of low pricing.

Expenses and Adjustments

Adjustments are any expenses that the seller was supposed to pay in advance and which begin to apply after you receive ownership rights. These expenses may include utilities and property taxes. Expenses include legal fees paid on your behalf — costs for title searches, mortgage registration, etc.

Unfortunately, these expenses are unavoidable. Plan for them in advance when buying a home to avoid unexpected costs at closing. Some experts recommend budgeting between 2 and 5% of the purchase price for all closing costs.

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Property Transfer Taxes

Property transfer taxes vary by state, province, and — in some cases — even by county or city. Therefore, it's impossible to give you an exact authoritative estimate of how much you can expect to pay.

Some transfer taxes in the U.S. are low (0.1% in Colorado), while others are high (up to 4% in some American cities). In Canada, some provinces do not impose a property transfer tax while others set rates from 1 to 3%.

Luckily, many places offer exemptions for first-time home buyers on transfer taxes. Research the specific location where you plan to buy a home to get a more accurate picture of your expenses.

After Closing

You've crossed the finish line and can now take that long-awaited sip of water. But there are still a few more things to budget for. Set aside money for moving expenses, home improvements, household items, utility connections — and if it's a condo, elevator rental for moving.

It’s also wise to create a 'reserve fund' — part of the money you can use for urgent repairs or unexpected ownership expenses.

This is by no means a complete guide to closing costs, but it should give you a good idea of what to expect. For a more comprehensive understanding, you can speak with your local bank or financial advisor.