What are the typical closing costs for a home purchase in the Kansas City Metro?
One of the biggest shocks new home buyers have during my mortgage consultations with them is that there are closing costs BEYOND just their down payment.
Down payments can range from 0% - 3% for first time home buyers. Someone buying a $200,000 house with 3% down payment may be thinking all they have to come up with is $6,000 ($200,000 purchase price X 3% down payment). The truth is there are other costs associated with closing a loan, we call these “closing costs” simple enough, right?
A couple of things to note:
Closing costs can vary from lender to lender. Always ask for a “Fees Worksheet” or a “Loan Estimate” from your lender to compare.
You are not always required to pay the closing costs on your own. You can get help in the form of “closing costs credits” from:
The Sellers.
The Lender.
Family Members (in the form of gift funds).
Or some combination of all of these.
*There can be a limit on the total of closing costs credits you can get depending on the loan program you are using and the amount of down payment you are putting down. Check with your Lender to make sure you aren’t getting TOO much in closing costs credits.
Alright, so you came here to get an idea of how much closing costs run on a typical home purchase, so let’s get into it. Please note these can vary based on many things (purchase price, loan amount, down payment, title company being used, lender, etc). These are general figures to help you decide if you might be ready to purchase or not. Always check with a lender before you come to that conclusion though.
Lender Costs:
Admin Fees: Most lenders these days are going to charge some sort of an Administrative Fee. These go to help cover the costs of things like processors, underwriters, or set costs that lenders have on all loans. These can also be called Underwriting Fees or Processing Fees. These vary GREATLY from lender to lender and are not a set costs.
Costs: Typically in the Kansas City Metro these range from $1,000 to $2,500.
Discount Points: This is also known as a permanent rate buy down fee. It is something you can use to “buy” your interest rate lower. It’s called a discount point because you are “discounting” the interest rate. Essentially you are trading a fee up front for a lower interest rate over the life of the loan.
Costs: Can range from as little as a couple hundred dollars upwards of 3% of the loan amount. This can get costly very quickly, and it completely varies from lender to lender.
Origination Fees: These are typically additional “profit margin” that lenders charge on a given loan. Sometimes they use this to offer a lower interest rate. Sometimes lenders use this to pack in additional profit into a loan. Sometimes these are “offset” by a lender offering a “Lender Credit” to hep pay some or all of these costs.
Costs: Much like “discount points” these can range from as little as a couple hundred dollars upwards of 3% of the loan amount. Again, this can get costly very quickly, an dit completely varies from lender to lender.
Third Party Costs:
3rd Party Fees: There are 3rd parties involved in every transaction to purchase a home, these can be Title Companies, appraisers, credit reporting companies, etc.
Title Company Costs: Typically around $1200.
Appraisal Costs: Typically around $650
Credit Report Costs: Typically around $150
County Fees: Counties charge to have the deed (which is the legal instrument/document that now says you are the new owner of the home) recorded.
KS County Costs: Typically around $475
MO County Costs; Typically around $150
Insurance and Taxes Costs:
Escrow/Prepaid Fees: These are costs for insurance and property taxes. These can vary greatly based on several things including: local and county tax amounts, insurance coverages, the assessed value of the home. For instance a yearly tax bill is generally 1.25 - 1.6% of the assessed value of the home. A $300,000 home could have a yearly tax bill of $3750 to $4800.
Property Taxes Costs: Typically you need at least 3 months of the monthly tax bill up front or between $937.50 to $1,200 in our $300,000 purchase price example.
Insurance Costs: Typically insurance premiums around .8% of the purchase price or in our $300,000 purchase price example around $2,400. You will pay this upfront plus you will typically need another 3 months of the monthly insurance bill for the escrow account (where your taxes and insurance are paid out of your mortgage) or around $600.
Total Typical Costs (in a $300,000 purchase price example): Around $7,500 (and can be quite a bit more if a lender is charging you discount points or origination fees).
Down Payment + Closing Costs:
If you are purchasing that $300,000 with 3% down payment that would mean you would need at least $6,000 for the down payment, and then another $7,500 in typical closing costs for a grand total of $13,500.
Again, remember, your lender could potentially offer you a lender credit, the seller could potentially offer you a seller credit, or your family might offer you some gift funds to help pay some or all of the closing costs. You can also get gift funds from a family member to pay some or all of your down payment.
Play your cards just right and you could ultimately come out of pocket $0 to buy a house. However, you are going to need some willing sellers, some generous family members, and one heck of a great negotiator as your Real Estate Agent to make that happen!
Questions on this, reach out any time:
Call/Text: 913-213-3335
Email: mike@rateshopkc.com
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