You’re going to hear the terms “closing costs”, “settlement fees” and “expenses” a lot as you’re going through your home purchase experience, and you may be unfamiliar with the terms. Below is an outline of what those terms mean, how they come into play as you’re buying your house, and what you should be looking for during this part of the process.
Down Payment: This is the amount of money you’ll put down to secure your new home. This amount can range from 3 to 20% of the purchase price depending on your credit score and other factors. Generally, you can expect to pay between 5 to 10%, but you can discuss your options with your lender and find the right solution for you. Remember – the larger your down payment, the lower your mortgage payment.
Closing Costs/fees/expenses: These are the costs that are associated with the buying of your home. They are also referred to as settlement fees. They include the expenditures associated with working with your lender, your real estate agent, and others who assist in the process of purchasing your home. You can expect to spend 2 to 5% of your purchase price on closing costs. This is in addition to any anticipated down payment. Don’t forget to plan for these expenditures when you’re putting together your financial plan at the start of your house search.