Closing Costs Explained

When you’re buying a home, there’s a lot more to factor in beyond just the purchase price. One of the crucial considerations is closing costs. But what exactly are these costs, and why should you care?

What are closing costs?

Closing costs refer to the various fees and expenses you incur when finalizing the purchase of your new home. They typically range from 2% to 3% of the loan amount and cover essential services like loan origination fees, title insurance, attorney fees, and more. These costs matter because they can significantly impact your overall budget for buying a home. 

Understanding and preparing for closing costs is vital because they ensure the legal transfer of property ownership and protect both you and the lender. By budgeting for these expenses upfront, you can avoid last-minute financial surprises and smoothly navigate the home-buying process with confidence.

In Ohio, closing costs usually include the following:

  • Loan Origination Fees: These are charged by your lender for processing your loan. They typically cover document preparation, underwriting, and other administrative services.

  • Appraisal Fees: Before a lender approves your loan, they need to know the home’s value. An appraisal fee pays for a professional to assess the property’s worth.

  • Title Insurance: Ohio requires both an owner’s title insurance policy and a lender’s title insurance policy. This ensures that both parties are protected against potential claims against the property.

  • Attorney Fees: While it’s not mandatory to hire an attorney for closing in Ohio, it’s highly recommended. An attorney can help review the title work, handle any legal issues, and ensure that the closing documents are accurate.

  • Recording Fees: Local governments charge a fee to officially record the sale of the property, making the transfer of ownership public record.

  • Transfer Taxes: Ohio imposes a transfer tax on real estate transactions, which is typically $1 per $1,000 of the sale price. Some counties may have additional transfer fees.

  • Settlement Fees: Also known as closing or escrow fees, these are typically split between the buyer and the seller in Ohio. These fees cover the cost of the closing agent or title company managing the closing process.

  • Costs associated with property taxes, homeowners’ insurance, mortgage interest, and the home inspection are typically paid upfront rather than at closing.

Who Pays Closing Costs in Ohio?

In Ohio, who pays closing costs can vary and is often negotiable. Typically, the buyer pays for loan-related fees. Title fees, on the other hand, are sometimes split between the buyer and seller, but in Central Ohio, the seller often pays for it entirely. If the selling isn’t covering the costs at closing, you will be required to pay all costs in the form of “guaranteed funds” such as a cashier’s check or wire transfer. Your escrow office or mortgage lender will notify you of the exact amount.

Closing costs are an essential part of buying a home, and knowing what they are and planning for them can make your journey to homeownership much smoother and less stressful. Keep these tips in mind, and you’ll be ready to close on your new home with confidence.

At Vutech | Ruff, Cutler Real Estate, we’re here to make your home-buying or selling experience seamless and enjoyable. We recognize that every buying and selling situation is unique, and we tailor our approach to fit your specific needs and make the whole process as easy as possible for you.

Contact us to get started! 

All About Down Payments

You might be eager to buy a new home, but the down payment has you questioning whether it is a realistic dream. The good news is that it may be more achievable than you think.  

While a 20 percent down payment has been the traditional standard for purchasing a home, the fact is that it is not mandatory and there are loan options that have a much lower minimum requirement. That means you could be closer to your homebuying dream than you realize. 

How Much Down Payment Do You Need to Buy a House? 

According to the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. In fact, for all homebuyers today it’s only 15%; and just 8% for first-time homebuyers.   

Lenders and government programs have different down payment requirements, depending on the type of loan being used. While most home buyers purchase homes with conventional loans, other financing options are available.  

Types of Mortgage Loans 

  • Conventional loan: These loans don’t have backing from a governmental program and, therefore, have stricter standards for credit scores, debt-to-income ratio (DTI), and down payments. Specifically, first-time home buyers must provide a down payment of 3% or higher, and experienced home buyers must put down at least 5%. 
     
  • Federal Housing Administration (FHA) loan: Backed by the FHA, these loans require private lenders to follow government regulations when providing loans to borrowers with weaker credit and lower incomes. Because of the more flexible loan requirements, FHA loans require a 3.5% down payment for all buyers. 
     
  • Department of Veterans Affairs (VA) loan: VA loans are for veteran and active-duty military members and eligible surviving spouses. have minimal financial hurdles, and oftentimes do not require a down payment. 
     
  • U.S. Department of Agriculture (USDA) loan: USDA loans are for borrowers in qualifying rural areas with moderate financial requirements, and borrowers don’t have to have a down payment to qualify. 

Down Payment Assistance 

There also are a variety of resources available to help with a down payment. In fact, there are over 2,000 homebuyer assistance programs in the U.S., many intended to help with down payments. Your lender can help identify programs for which you may qualify. If you’re ready to become a homeowner, lean on your trusted advisors to find resources that can help you make your dreams a reality.  

At Vutech | Ruff, Cutler Real Estate, our team is ready to help. We pride ourselves on our in-depth knowledge of the Ohio real estate market and financing options available for our clients. 

Finding your dream home is one thing. Your dream experience is another. Contact us and let’s have a conversation.