One of the biggest worries for first-time homebuyers is how much cash they need to have to actually move in to their dream home and when they have to pay it. Here’s a good ballpark figure to add to your down payment:
Now that you got the information you were looking for, here’s what’s covered in all those “closing costs” and why you need them in a purchase of a $500,000 condo.
Let’s assume you paid 20% as a down payment, there are other options, but the math is easier. Outside of that $100,000 down payment you have other costs that are needed to pay for all the legal hoops and paperwork the settlement attorney has to jump through. In this estimate, that additional fee comes out to $17,500 – or 3.5% of the purchase price.
What’s covered in the closing costs? Lots of stuff! First off, there’s money that your lender will charge to process your loan. That’s called an “origination charge.”
Next are some thing you didn’t “shop for” but had to buy anyway. Appraisal fees, credit report, flood certification and tax services.
Then come some services you did shop for: location survey (to make sure your condo is where it is legally supposed to be), termite inspection, title processing, settlement fees, etc. The biggest chunk in this section is your “Title Insurance”, which is protection incase the cousin of the person who owned the condo in the 80s comes along and claims that the place is his because of some will that was only recently discovered. It’s not mandatory, but like all insurance, it’s not fun if you need it and don’t have it.
After that the government sticks their hand into the pot and collects their tax. In DC the Recordation and Transfer Tax is 1.1% if the home is $399,999 and under and 1.45% if the home is over that. Buyer and seller both pay that amount and in this case that comes to $7,250. This is usually your largest charge at closing.
Then comes home insurance costs, mortgage insurance, prepaid interest, property taxes and any broker fees you may be charged.
The good news? That Earnest Money Deposit check you wrote with your offer (to make sure you weren’t some crazy drifter and might skip down) gets applied to your closing costs. So if you wrote a nice fat $20,000 check then you’ve got some money coming back to you!
When in doubt, 3.5%. Could be a little more, could be a little less, but 3.5% is a good estimate for the area.
The Earnest Money Deposit (or escrow) is due when you write the offer so you should have those funds ready to go. Everything else is due at the settlement table when you get the keys.
Have a property you’ve been eyeing? Let me know and I can run some different scenarios to see what you need to bring to the table.
It’s not just you, DC is getting younger. A recent survey from Nielsen has DC tied for 3rd for top cities for Millennials – or people born between the early 80s to early 00s.
That demographic now accounts for a whopping 14% of the population, tied with Denver and Los Angeles. It’s also the only eastern city in the top 10!
What’s attracting this generation to Washington? Walkability. 62% of those surveyed liked living near mixed use developments found in dense city centers, like CityCenter downtown or DCUSA in Columbia Heights. Walkability and convenience rules over the space afforded by the burbs.
And for the first time since 1940, the cities are growing faster than the rural areas – all thanks to this group.
If you want to see the future of DC, just look to those neighborhoods. As Millennialsget more buying power, their wants and needs will dictate what developers build.
And that means less houses on the hillside made of ticky-tacky and more Union Markets and (hopefully) Metro lines.