First-time Indiana home buyers may not be aware of all of the fees that pop up in closing costs. We’ve listed the expenses you should expect to be hit with when finalizing the purchase of your home. Knowing about anticipated fees will help to prepare you financially for this major life milestone.
Whether you’ve found the perfect home, or are still in the early stages of the home buying process, you should know that the down payment will not be your only out-of-pocket cost. Knowing what expenses to expect can help you plan accordingly and avoid any last minute cost scares.
This is why we recommend that you do your homework and educate yourself on all fees involved in buying a home. Furthermore, we encourage you to work with an experienced, local real estate agent in order to have realistic expectations and to best prepare yourself before pulling the trigger on a home purchase.
Want to connect with a top-rated, Indiana 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 Indiana Homes: What to Expect
According to data from Bankrate, average closing costs in the state of Indiana are $2,045. This includes origination and third-party fees. Keep in mind that this study does not account for a number of variable costs, such as title insurance, title search, taxes, other government fees, escrow fees and discount points — which means you should expect even more costs down the road.
To help you get a better grasp of how much you’ll be spending, you should expect to pay anywhere between 2% and 5% of the total cost of your home. Let’s take a look at an example: The median listing price in the state of Indiana is $174,900, so expect to pay anywhere between $3,498 and $8,745.
While closing costs can be expensive, one of the largest mortgage expenses is the interest rate. Over the life of the loan, a few small percentage points can result in hundreds of thousands of dollars in interest payments.
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Common Closing Costs for Indiana Home Buyers
There are a few different types of closing costs to buying a home that you should familiarize yourself with. We’ve outlined what expenses you should expect to encounter below.
Mortgage Origination Fees
Loan origination fees are the fees charged by the bank or mortgage lender for the creation of a loan, and are approximately 1% of the mortgage amount. Depending on the risk factor of the loan and the borrower’s creditworthiness, these fees may be negotiable; typically speaking, the more collateral you provide, the more you will be able to negotiate.
Discount Points are a type of prepaid interest that the buyer can purchase upfront to reduce the interest rate charged by the bank. These fees are negotiable and may be covered by the bank.
Appraisal fees are the fees for a professional appraiser to assess the value of the home. Depending on the type of property, location and property size, these fees typically run between $300 and $500 on average.
Title Insurance and Title Search
Title insurance is a type of indemnity insurance that is offered by title companies that insure against losses resulting from defects in the title, such as liens, outstanding taxes, mortgages and violations belonging to previous owners.
A title search ensures that all parties that the property purchase is free and clear of all obligations, and that no party has a claim on the house because of unpaid dues, legal suits, and other factors.
In the state of Indiana, both the Title Search and Title Insurance are combined into one flat fee that can range anywhere between $400 and $700.
When the buyer gets a loan, their lender may require them to pay for some things, such as property taxes and homeowners or rental property insurance in advance. These are known as prepaid costs. The lender lists these costs in an estimate of closing costs called The Good Faith Estimate, which is given to the buyer no more than three days after applying for a loan.
Local governments charge recording fees and taxes to record the sale of property. Recording fees are also commonly known as transfer taxes. In Indiana, this fee will cost you about $50.
The survey fee pays for the surveyor to show the exact boundary, location, and legal description. The cost can range from $200 to $400 in Indiana, and may be paid by the seller in some areas of the state.
Credit Report Fee
Lenders will pull your credit report to qualify you for a loan. The fee can range from $45 to $75 in the state of Indiana, and is generally passed onto you once your application has been approved.
Other Costs to Consider
Before pulling the trigger and purchasing your next home, there are a few other charges you need to take note of. We know that’s not what you want to hear, but you’ll thank us later when you’ve already set aside the money needed to cover all these fees when it comes time to fork over the cash.
Homeowners insurance covers possible damage to your home. Your first year’s insurance is often paid at closing. Indiana's annual premiums for homeowners insuranceare on the lower side, averaging $983 per year. How much you will have to pay can vary a lot depending on your home's size, your assets, and your home address.
Property taxes are ordinarily calculated by local government agencies and paid for by the owner of the specific property. The taxes are primarily based on the value of the home, which includes the land on which it sits.
The median property tax in Indiana is currently $1,051.00 per year for a home worth the median value of $123,100.00. Counties in Indiana collect an average of 0.85% of a property's assessed fair market value as property tax per year.
Utilities and Maintenance Costs
In Fort Wayne, IN, the cost of utilities is fairly inexpensive; the utility index rates at 82, which translates to $157.85 a month.
We can’t stress enough the importance of ensuring financial stability before making the decision to purchase a home. Knowing what costs are coming around the bend should help give you an idea of how much you’ll need to set aside for closing costs.
How to Save on Closing Costs in Indiana When Buying a Home
To save on closing costs, you may want to consider taking advantage of closing cost assistance programs. In Indiana, you have several options you may be eligible for.
Affordable Home provides below-market interest rates on FHA loans for low to moderate income home buyers who have enough money for their down payment and closing costs. To qualify, you must have a minimum credit score of 660, and you must be a first-time home buyer
My Home is for low to moderate income home buyers who provide funds for the down payment and closing costs of your home. My Home is available for first-time home buyers, as well as repeat buyers. The minimum credit score required for this assistance program is 640.
Additionally, you can save even further on closing costs by negotiating with sellers. An experienced real estate agent will be able to assist in the process, and can work to get you a more manageable fee when it comes time to close on your new home.