When buying or selling a home, you need to be aware of the extra costs that you will need to pay in addition to the costs of the actual home. Closing costs are unfortunately like a bill that needs to be paid, once everything is finalized.
If you are wondering how much closing costs are in PA, closing costs in Pennsylvania are some of the highest in America. It is important for real estate agents and realtors to understand what closing costs are, what is paid to whom, and what is and isn’t necessary.
What Are Closing Costs?
A closing cost is a term to describe the expenses and fees that are included in the sale of a house. Closing costs also come into play when properties are transferred from one owner to a different owner. Closing costs include many things, like title insurance, home warranties, utilities, and prorated rent.
Pennsylvania is one of those states where closing costs are high compared to other places in the country. The closing costs can range anywhere from 1 percent to 7 percent. However, Pennsylvania home buyers usually pay 5 to 6 percent of the home’s value.
Before taxes, the total average closing cost is about $4,000. After taxes, the total average closing cost can be around $10,000 or more. You should expect the closing cost total average to be between $6,000 and $15,000.
What Is Included in Closing Costs?
Closing costs include a variety of factors.
Deed Transfer Tax
The deed transfer tax is divided between the seller and the buyer half and half. This amounts to 1 percent of the sale price of the house.
Loan costs include prepaid interest, application fees, and origination fees. This amounts to around 1.5 percent of the house’s sale price.
Per Diem Interest
Per Diem interest is the interest that you will pay on your loan from the date of your closing to the last day of the month. Per Diem interest can fluctuate.
During the closing of a home, the presence of an attorney is required in the state of Pennsylvania. Typically, the cost of having an attorney present is between $150 and $500.
Inspection of the Home
A home inspection usually costs about $430. A home inspection is done to ensure that everything is cosmetically and structurally correct. This includes the inspection of the HVAC system, appliances within the home, the foundation, and much more.
To ensure that there are not any outstanding liens or debts on the property, a title search is done. A title search will also confirm that the property is definitely owned by the seller. The cost of a title search can range anywhere from $300 to $600 in Pennsylvania.
Appraisals usually will cost about $350. Appraisals are done to determine how much money the home is worth.
Title insurance, which usually costs about $1,000, protects the current homeowners and mortgage lenders from any outstanding issues with the title.
Survey of the Property
A lot of the time, lenders will ask for a survey of the property. This identifies the precise dimensions and extents of the house’s property.
Recording fees, which are the property’s transfer or deeds fees, tend to fluctuate.
Additional outstanding fees include a variety of things. Some outstanding fees are utilities, property taxes, HOA fees, and homeowner’s insurance.
Mortgage Payoff and Penalties
When the seller of the home pays off their mortgage too early, there might be a prepayment penalty. The costs of prepayment penalties vary.
Closing or Escrow Fee
This fee is paid to the title company, escrow company or the attorney that conducts the closing.
The buyer’s credit score needs to be pulled to obtain credit history before the purchase of the property. This will determine the interest rate for their loan.
A pest inspection is not required in Pennsylvania but is usually performed before the closing. This will ensure there is no dry rot or termites present in the property.
How to Estimate Closing Costs in Pennsylvania
There is a small math equation that will help you calculate Pennsylvania closing costs. You will need to take the sale price of the home and multiply it by the percentage of the closing cost. If a house is sold for $200,000 with a 5 percent cost of closing, you would do $200,000 times 5 percent equals $10,000. In Pennsylvania, the median price of a home is about $200,000.
Who Pays Closing Costs in Pennsylvania?
The buyer and seller will divide the closing costs evenly, but usually, the buyer will pay more. These fees are the most common fees throughout the home buying process. Not all of these fees will apply to everyone, and some property exchanges have additional fees.
Closing Costs for Buyers
The buyer will typically pay at least 5 percent of the closing costs. There are many factors included in the estimated closing costs for the buyer.
Home inspection fee
Mortgage lender fees
Tax escrow service
Broker coordination fee
Closing Costs for Sellers
The seller will usually pay somewhere between one and three percent of the home’s estimated closing cost. Sellers are responsible for a variety of fees.
Mortgage prepayment penalty
Any outstanding property amounts owed
Deed transfer tax
Can Buyers Pay Sellers Closing Costs in Pennsylvania?
If the seller decided to pay the buyer’s closing costs, they certainly can. This typically happens if the market is weak and the seller wants to make a deal, or if the seller wants to quickly sell their home. This is also common when properties have a lot of issues that need to be resolved, like structural problems. The seller will often try to convince the buyer to purchase the property, despite the issues if they pay their closing costs.
Can Home Buyers Avoid Closing Costs?
Homebuyers can avoid closing costs by getting a no-closing cos mortgage. This means exactly as it sounds, that the buyer does not pay any closing costs when closing on the mortgage. If a lender offers this kind of deal, there are usually consequences in the future.
The closing cost fees can end up going into the total mortgage owed, in which the buyer will have to pay interest. The lender might even charge the buyer for a higher interest rate on the loan because they did not pay the closing costs. This tends to happen if the buyer cannot negotiate with the seller over who will pay the closing fees.
Understanding how much closing costs are in PA is important for new agents and brokers. At Christian Saunders Real Estate, we would be more than happy to discuss your goals and ambitions for becoming a real estate agent. If you already are an agent and are struggling to get started, contact us today and we will be happy to help.