Many buyers in the Chicagoland area are unaware of some of the costs associated with buying a home. Closing costs are something that buyers will encounter during the home-buying process. The good news is we are here to prepare and make you aware of what to expect. Here is a breakdown of some of the most common closing costs associated with buying a home:
Title Fees
Every home for sale in Chicago involves a neutral third-party escrow company. This role is often filled by an attorney or title company. Their role in the transaction is to verify that the seller of the property you are buying has legal ownership, hold and disperse funds when necessary, and to file all necessary documentation with your local county and the state. There is a lot that goes into the work the title company does. A few common title charges you might encounter are a recording fee, a notary fee, title insurance, and an attorney closing fee. If you are closing remotely outside of the title office, you may also be charged a courier fee. This allows you the ability to close on your home from anywhere in the country!
Lender Fees
One large portion of your closing costs comes from the lender. Within three days of submitting a mortgage application, your lender has to provide you with a detailed report of your estimated interest rate, monthly payments and the associated closing costs for your loan. These are fees that cover the extensive work that your mortgage team will do for you. The costs vary by bank and by lender, but there are a few common ones that we see. Some fees that buyers will incur are a loan origination fee, discount points for a better mortgage rate, a processing fee, an appraisal fee, and underwriting fees. We encourage you to talk to a solid home loan professional to get a more accurate projection of what you should expect. If you don’t have a good contact for a great mortgage professional, we would be happy to provide you with one.
Insurance
Insurance is another important aspect of buying a home. You want to make sure your home is properly protected from any kinds of damage it may incur from catastrophic events such as fire, storms, tornadoes, flooding and other natural disasters. A property insurance policy is also required by your lender for them to give you loan approval. So, oftentimes, this will be a requirement to purchase your home. There are many different options and policies available for homeowners, so make sure you talk to a good insurance professional to explore all your available choices. We also have a few insurance agents we can connect you with that do an amazing job.
Another type of insurance that is commonly required is private mortgage insurance. This insurance often referred to as PMI, is usually required by the lender when your down payment is less than 20%. Typically, once your home equity reaches 20% of its market value, this private mortgage insurance can be removed. However, this is not always the case, so we recommend talking to a mortgage professional about this.
Questions like what are closing costs and how much will my closing costs be for my home purchase are ones that we get very often. We understand that it is very important to know the financial numbers before buying a home. That is why we make it easy to figure this out. During our initial home buyer consultation, we go over the estimated closing costs and many other important topics and aspects of the home buying process. If you would like us to give you a free consultation, please do not hesitate to reach out.