What are Closing Costs?
Closing costs are the various fees and expenses involved in finalizing a real estate transaction. These costs can include a range of items such as loan origination fees, appraisal fees, title insurance, and more. As a home buyer or seller in North Carolina, it’s essential to understand these costs to better anticipate your financial obligations in the home buying or selling process.
Who Pays Closing Costs in North Carolina?
In North Carolina, closing costs are typically divided between the buyer and the seller. While some costs are customarily paid by the buyer, others are the responsibility of the seller. However, the allocation of these costs can sometimes be negotiated during the home buying process.
How Much are Closing Costs for Sellers in North Carolina
Sellers in North Carolina can expect to pay several types of closing costs, including:
REALTOR Fee
The real estate commission is usually the largest expense for sellers, amounting to approximately 6% of the home’s sale price. This fee is split between the seller’s agent and the buyer’s agent.
Recording Fee
Sellers are often responsible for paying the recording fee for the deed, which can range from $50 to $150, depending on the county.
Escrow Fee
In some cases, sellers may be responsible for an escrow fee, which is charged by the escrow company for holding and disbursing funds during the transaction. This fee can range from $500 to $1,000 or more, depending on the property’s value and the complexity of the transaction.
Home Inspection Fee
Although not common, some sellers may agree to cover the cost of the home inspection as part of the negotiation process. Home inspection fees typically range between $300 and $500 in North Carolina.
How Much are Closing Costs for Buyers in North Carolina
Buyers in North Carolina can expect to pay several types of closing costs, including:
Homeowner Fees
These fees include homeowners insurance premiums, property taxes, and prepaid interest on the mortgage. The exact amount will vary based on the specific property and the time of year.
Lender Fees
Lender fees can include loan origination fees (typically 0.5% to 1% of the loan amount), appraisal fees (ranging from $300 to $450), credit report fees, and other related charges.
Third Party Fees
Third-party fees can encompass items such as title insurance, attorney fees, and recording fees. These costs can vary greatly based on the specific transaction and service providers involved.
How are Closing Costs Calculated?
Closing costs in North Carolina are calculated based on a variety of factors, including the property’s value, location, type of loan, and service providers involved. Typically, closing costs can range between 2% and 5% of the home’s purchase price.
For example, if you’re buying a $200,000 home, you can expect to pay between $4,000 and $10,000 in closing costs. It’s important to note that these costs can vary significantly, and the best way to get an accurate estimate is to obtain a Loan Estimate from your lender and request a Closing Disclosure before closing.
Closing Costs in North Carolina for Refinance
If you’re considering refinancing your mortgage in North Carolina, it’s essential to understand that closing costs will still apply. Refinancing closing costs can range from 2% to 3% of the loan amount, which is generally lower than closing costs for a home purchase.
These costs can include loan origination fees, appraisal fees, title insurance, and recording fees. As with a home purchase, the best way to get an accurate estimate of your refinancing closing costs is to request a Loan Estimate from your lender.
Junk Closing Costs to Watch Out For
While many closing costs are legitimate and necessary expenses, it’s essential to be aware of potential “junk” fees that may be added to your closing costs. These fees may be excessive or unnecessary and can inflate your overall closing costs. Some common junk fees to watch out for include:
- Administrative or processing fees: Some lenders may charge excessive fees for document preparation, underwriting, or other administrative tasks. Compare these fees with those of other lenders to ensure you’re not overpaying.
- Courier or mailing fees: Ensure that these fees are reasonable and reflect the actual cost of delivering documents. If these fees seem excessive, ask for clarification or negotiate with the lender.
- Unnecessary add-ons: Be cautious of additional services or insurance policies that may be presented as part of your closing costs but aren’t actually required. Make sure to review each item on your Closing Disclosure and ask questions about anything that seems unnecessary or unclear.
How Much Closing Costs in North Carolina
When it comes to closing costs, the amount you’ll pay can vary significantly depending on the state you’re in. In 2021, the national average for closing costs stood at $6,905, equivalent to 1.3% of the average total sales price. However, it’s important to note that these costs can differ considerably from state to state. For instance, homebuyers in Washington D.C. might find themselves paying as much as 3.9% of the total sales price in closing costs, while those in Missouri may only incur 0.9% in comparison.
Thankfully, if you’re purchasing a property in North Carolina, you’ll be pleased to know that the state’s closing costs come in slightly below the national average, amounting to just 1.1% of the sales price. Let’s say your dream house has a closing price of $300,000; in this case, you can anticipate paying approximately $3,300 in closing costs.
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