The majority of home buyers are familiar with traditional upfront costs like down payments. In fact, the down payment is probably the upfront cost most home buyers think of when calculating the costs of homeownership. However, the down payment isn’t the only thing you have to think about.
Closing costs can be substantial and, if you weren’t planning for them, they could seriously damage your ability to purchase a home. It’s critical that you do your homework to make sure you understand the full cost of buying a Connecticut home.
Partnering with a local real estate agent can help you avoid common pitfalls and also help ensure that you’re thoroughly prepared for all the costs involved in buying a home.
If you want to connect with a top-rated Connecticut buyer's agent, Clever can help. Fill out our online form and we’ll be in touch to answer any questions you might have and introduce you to one of our local Partner Agents for a no-obligation consultation.
Closing Costs for Connecticut Homes: What to Expect
Closing costs in Connecticut include a number of fees that you may or may not be aware of. According to recent data from Bankrate, the average buyer in Connecticut spends around $2,275 on closing costs.
However, this study doesn’t account for a number of many of the fees that are often wrapped into closing costs, many of which are variable in nature and are hard to predict. For instance, the fees associated with title insurance, title search, taxes, and other governmental costs, escrow fees, and discount points are all a part of closing costs and can vary by situation, amount borrowed, the size of your down payment, and other factors.
Though variable, the general rule is that buyers should expect to spend anywhere from 2% to 5% of the purchase price of their home on closing costs.
The median list price in Connecticut is $243,700. If you purchase a home for that amount, you should expect to spend anywhere from $4,874 to $12,185 in closing costs at a minimum.
Taking all of this information into account, it’s not hard to see why considering closing costs in your financial planning is such an important thing to do. Without adequately planning for these costs, you can find yourself in an unpleasant financial situation come closing.
But what are these closing costs? What do they include? And how much can you expect to pay for them?
Common Closing Costs for Connecticut Home Buyers
Some of the most common closing costs in Connecticut include a long list of fees, payments, and associated expenditures that run the gamut from government filing fees to taxes and everything in between. Here are just a few of the most common fees and expenditures that are often wrapped up into the buyer’s closing costs.
Mortgage Origination Fees
It might be hard to believe, but you actually have to pay the lender a fee to originate your mortgage. Basically, you’re paying to begin the mortgage process. Usually, this fee isn’t too high, but it certainly doesn’t help when you’re already looking at a long list of closing costs.
Credit Report Fees
This fee is relatively straightforward. You have to pay (usually) for the credit report that your lender runs on you. Sometimes this fee is waived, but it’s worth taking into consideration regardless just so you know that it might show up as part of your closing costs. For most buyers, the credit report fee is around $50.
Discount points are upfront, prepaid points that you purchase in an effort to lower the interest rate your lender will charge you later on. In essence, you’re making an upfront payment once in exchange for lower ongoing payments into the future. It’s a little bit like purchasing an annual plan over a monthly plan, but as applied to your loan.
In almost every real estate transaction, an appraisal has to be done to determine the value of the property. Typically, the buyer pays this fee, which can be anywhere from $300 to $500 or more.
Real Estate Agent Fees
While the seller usually covers real estate agent commission, there are still a number of fees that you, as a buyer, might have to pay. What’s more, the negotiation phase determines who pays what, so just because the seller normally pays the buyer’s agent’s commission, that could change during negotiation.
While title insurance can be complicated, the basic idea is simple. You’re paying for insurance that protects you in the event that there’s an issue with the title of your home later on.
For instance, if you find out at some point that there’s a lien against the property that the buyer didn’t disclose (or wasn’t aware of), your title insurance will probably protect you from having to pay those fines. In most cases, purchasing title insurance is non-optional and is the buyer’s responsibility, since you’ll be the title holder once you buy the home.
Private Mortgage Insurance (PMI)
If you have a conventional mortgage loan with a down payment of less than 20%, it’s likely that you’ll have to pay for private mortgage insurance. This cost is the buyer’s responsibility without question, in most cases. This fee varies from between 0.3% to 1.5% of the total loan amount and is an annual expense. However, the size of the loan, your credit score, and other factors determine how much you’ll have to pay.
Between the date of closing and the end of the month, several insurance costs and other related expenses will likely accrue. These fees are wrapped up in prepaid costs, or fees the buyer pays in advance when getting a loan. Not every buyer will have prepaid costs, although most do, and the amount you’ll have to pay can vary widely depending on your situation.
Other Closing Costs
There are other closing costs you might have to take into account, as well. These can include recording fees, state taxes, and transfer taxes. If you’re required to pay these, they are also wrapped into closing costs.
Additionally, you’ll have to consider costs such as the ones associated with surveys, which usually cost between $350 and $500, title searches, which usually fall between $200 and $300, and notary fees, which range from $75 to $150 on average.
While many of these fees seem small by themselves, it’s not hard to see how they can all add up to a hefty sum of money that you might not have realized you’re responsible for.
By the time you finish compiling all the fees and costs associated with closing costs, you can see a clear picture of how important it is to be prepared for closing. Be sure to work with a local, experienced real estate agent in Connecticut to help you through the process so you don’t miss anything.
Many of the above closing costs also have paperwork associated with them. This paperwork has to be filed on time in a certain order, and missing one step of the process can set your home buying process back months. Work closely with an experienced real estate agent to help you through the home buying process.
Other Costs to Consider
Closing costs, when added to your down payment, constitute the bulk of the upfront costs you’ll have to think about when purchasing a home. But as a new homeowner, your financial obligations don’t end there.
For instance, your homeowners’ insurance policy and property taxes have to be taken into consideration. These are recurring fees that you’ll be responsible for throughout the life of your loan and, for some, as long as you own the property. In addition, you’ll have to pay higher utility rates, and you’ll also have to consider ongoing maintenance costs.
Ensuring your financial stability and being honest with yourself about your fiscal readiness is a critical step that every home buyer has to take before making the decision to sign on the dotted line.
How to Save on Closing Costs in Connecticut When Buying a Home
There are several ways you can save on closing costs in Connecticut, especially if you partner with a local, experienced real estate agent
For one thing, most of the closing costs are settled during negotiations. When you negotiate with the sellers, sometimes you can end up having to pay fewer closing costs than you initially would have. Sellers might agree to work with you on a number of closing costs in order to secure a more amicable transaction.
Additionally, you might be able to obtain assistance through a closing cost assistance program. There are several state, federal, and private lending options that often cover closing costs or allow you to obtain a certain amount of money to be put toward closing costs. For instance, the Federal Housing Authority (FHA) has several federal and state programs designed to help with closing costs.
If you’re a first-time home buyer, there are various programs from agencies such as Fannie Mae and Freddie Mac that can also be beneficial where closing cost assistance is concerned.
Lastly, Clever’s Home Buyer Rebate program can act as an additional cost savings opportunity for home buyers in Connecticut. Qualified buyers can receive a Home Buyer Rebate of $1,000 that can be applied to closing costs.
This can help tremendously when you’re estimating your financial responsibility and determining your fiscal readiness for homeownership. Fill out our online form and get started today with a no-obligation consultation.