If you’re buying a home, you may wonder what closing costs include and how much you’ll have to pay as a buyer in South Carolina. Here are some of the most common and some ideas on how to pay less.
As a buyer, you’re typically off the hook for real estate agent commissions, as they’re usually paid by the seller. However, you’ll still need enough money for your down payment and closing costs. Since most closing costs are fees related to a mortgage, you’ll pay more of them than the seller, assuming you’re getting a loan, as most buyers do.
Closing costs vary by state and lender, so work with an experienced, local real estate agent to have realistic expectations about exactly how much of these costs you will pay for your purchase in South Carolina. Having a good estimation prior to your search helps you know how much you can spend on a home.
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Closing Costs for South Carolina Homes: What to Expect
Depending on your local market and the specifics of your loan and lender requirements, your closing costs may change. Find out exactly how much you’ll pay for them as a buyer by checking out the settlement statement provided to you by your title company before closing.
According to Bankrate, the average closing costs for the state of South Carolina are around $2,200. However, they don’t include variable costs like title insurance, title search, taxes, other government fees, escrow fees, and discount points.
As a buyer, expect to pay between 2% and 5% of the purchase price in closing costs. If you purchased a home for $338,000, the median listing price in Charleston, you could expect to pay between $6,760 and $16,900.
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 South Carolina Home Buyers
As a buyer, you pay mortgage-related and government-imposed fees at closing. These costs vary by county or town, but here are some to expect to pay:
An application fee is charged by some lenders when you submit an application for a loan. Some lenders lump your appraisal fee and/or credit check fee (mentioned below) into this fee as well and some may not charge you at all.
Lenders verify a home’s value and ensure their good investment through an appraisal. An appraiser’s assigns a value to the home and is typically less in-depth than a home inspection. An appraisal fee may be paid at the beginning of the loan process or at closing. Appraisals may cost you $200 to $400 in South Carolina.
Unlike other states, in South Carolina you must hire a separate attorney to handle the closing process, in addition to the title company. The state considers a real estate closing the practice of law. Fees can vary by attorney, but your real estate agent is likely to suggest one for you.
Credit Report Fee
Another mortgage related fee, the credit report fee covers the cost or your lender requesting your credit report as part of the loan process. Like the appraisal fee, you may have paid this when applying for your loan, or you may pay at closing. The credit report fee is around $25 per person.
In South Carolina, escrow accounts are common and is an account where money for future property taxes and homeowner’s insurance is held. Your lender pays out of this account on your behalf when these bills are actually due. The lender wants to make sure you are able to pay these large amounts so they split them up into smaller monthly payments that are added to your mortgage payment.
Homeowners’ Insurance Escrow - Your lender will want to have a year’s worth of insurance paid in full at closing, plus another two month’s worth of premiums. So, plan to have 14 months worth of insurance premiums ready upfront — your lender will immediately pay your insurance company for a full year and keep the remaining two month’s worth in escrow along with future payments to pay next year’s premium.
Property Taxes - You’re in luck! South Carolina has some of the lowest property taxes for owner-occupied homes in the country. The average effective property tax rate in South Carolina is just 0.57%, fifth lowest of any state. In South Carolina, taxes for last year are paid in the current year. For example, your 2019 taxes are paid in 2020.
The government expects you to pay the taxes even during the time in which you didn’t yet occupy it, so the seller will typically pay you the tax amount for the number of months that have elapsed in the year. However, your lender will likely ask you to pay that amount, plus an extra two months into escrow so the money will be available when taxes are due — generally by January 15 in South Carolina. For example, If you close in April, you would pay six months worth of taxes into escrow.
In South Carolina, it’s common for buyers to request a home inspection to verify the home’s condition and negotiate repairs needed. After initial inspection, other inspections and tests can be ordered if revealed to be necessary. South Carolina is one of the states that requires a wood infestation inspection. After inspection, a Wood Infestation Report is generated that lenders will require at closing. You may have paid for some or all of these inspections upfront, or you may settle the bill(s) at closing. You can expect to pay $300 to $700.
You may pay what are called “points” to your lender to lower your mortgage interest rate. Each point you purchase equals 1% of the total loan. This fee is a one-time charge from the lender that you pay at closing. You may or may not opt for a loan discount and your lender may or may not offer it based on your credit and history.
Loan Origination Fee
A loan origination fee pays for the lenders work in completing all the paperwork to process your loan. This fee is typically 1% of the total mortgage amount. You won’t pay this if you are purchasing without a mortgage.
If your lender allowed you to purchase with less than 20% of its appraised value as a down payment, you will probably be required to purchase monthly mortgage insurance. Private mortgage insurance (PMI) protects the lender in case you aren’t able to maintain your monthly mortgage payment and your home is foreclosed on.
Once you’ve reached 20% equity, you may be able to apply to stop paying this insurance fee. Be careful though, there is an additional fee for the application and you may have to pay out-of-pocket for a new appraisal. Your PMI usually falls off automatically after you reach 22% equity so this may be cheaper in the end. Check your specific mortgage agreement for specifics.
Prepaid Interest Fee
Since there is usually a lag time from your purchase date and your first mortgage payment, your lender will charge a prepaid interest fee to cover this. Mortgages are usually due on the first of the month, so the earlier in the month you close, the higher the prepaid interest fee.
Settlement or Closing Fee
Your title company charges a settlement fee for closing and overseeing the transaction as an independent party. In South Carolina, you can expect settlement fees to cost around $200.
Title Insurance and Search Fees
Title insurance is the title company’s promise that they have done a thorough search on the property you are purchasing and their are not liens or other stipulations on it and that the seller has a right to sell it. Title insurance fees are charged by the title company to cover the title search, title examination, title insurance, document preparation, and other miscellaneous fees. All buyers pay title insurance fees. These fees will likely cost you around $400.
This fee is also charged by your lender and covers their cost of determining whether or not to approve your loan.
Other Costs to Consider
When buying a home in South Carolina, you should also consider other added costs beyond closing. While your homeowner’s insurance premium and property taxes are likely included in your monthly mortgage payment, this is an added cost you’ll pay as long as you live in the home. Plus, you’ll want to plan for utility bills and maintenance and repair costs, especially if you’ve never owned a home before. Make sure you can easily manage all these costs before making the decision to purchase a home.
How to Save on Closing Costs in South Carolina When Buying a Home
While buyers typically pay most closing costs and sellers pay real estate commissions, all of this is negotiable. Your agent can help negotiate costs with a seller’s agent. You also may qualify for closing cost assistance through the SC Housing home loan program. You may be eligible for up to $6,000 in a forgivable down payment and closing cost loan — if you stay in the home for 10 years, this second loan is forgiven.
If you’re looking to buy a home in South Carolina, work with an experienced buyer’s agent who can help you negotiate for the best deal possible. Clever Partner Agents can also offer on-demand showings — sometimes in less than an hour — so you know you won’t miss out. Plus, you may be eligible for 0.5% of the purchase price back from Clever after closing.
Eligible Clever buyers get a check for thousands back after closing.