Tag Archives: Mortgage Costs

What Are Closing Costs? What Homebuyers Can Expect

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Buying a home is an exciting milestone, but beyond your down payment – there’s another important expense to plan for: closing costs. Understanding what they are, how much it may cost you, and what’s included can help you avoid surprises and feel confident on closing day.

What Are Closing Costs?

Closing costs are the fees and expenses required to finalize your mortgage and complete your home purchase. These costs are separate from your down payment and are typically paid when you officially “close” on your home and receive the keys.

They cover everything from lender and title services, to appraisal fees, escrow, legal paperwork, and local county property-related recording and notary expenses that ensure the transaction is secure and legally complete.

How Much Are Closing Costs?

Most homebuyers can expect closing costs to range from 2% to 5% of the home’s purchase price.

For example:

  • $250,000 home → approximately $5,000 to $12,500
  • $350,000 home → approximately $7,000 to $17,500

The exact amount also depends on factors such as:

  • Location
  • Loan type
  • Lender fees
  • Property taxes and local regulations

What Do Closing Costs Include?

Closing costs are made up of several categories. While they will vary by transaction, below are the most common ones:

1. Lender Fees

Charged by your mortgage lender for processing your loan:

  • Loan origination fee
  • Application and underwriting fees
  • Credit report fee

2. Property-Related Fees

Ensures the home is properly valued and legally transferred:

  • Appraisal fee
  • Title search and title insurance
  • Survey fees (in some cases)

3. Government & Legal Fees

These fees are tied to recording by your local government and transferring ownership:

  • Recording fees
  • Transfer taxes
  • Attorney fees (required in some states)

4. Prepaid Costs

Any upfront payments for ongoing homeownership expenses:

  • Property taxes
  • Homeowners insurance
  • Prepaid interest

These prepaid items aren’t necessarily “fees,” they’re typically expenses that are initially collected upfront at your closing.

Who Pays Closing Costs?

Both buyers and sellers will have closing costs, but buyers typically will pay the majority of loan-related fees, while sellers usually often cover agent commissions and potentially some taxes.

In some cases, you may be able to negotiate:

  • Seller concessions (the seller covering certain costs)
  • Lender credits
  • Local or state assistance programs

Be sure to discuss this with your lender and your real estate attorney throughout the homebuying process, so that you will be informed and prepared along the way.

When Are Closing Costs Paid?

Most closing costs are due on closing day, when you sign your final paperwork.  However, a few expenses like the appraisal or a credit check, may be paid earlier on in the homebuying process.

How to Prepare for Closing Costs

Planning ahead can make a big difference. Here’s how to stay prepared:

  • Review your Loan Estimate & Closing Disclosure to understand the expected costs
  • Budget beyond your down payment
  • Shop around for lenders and servicing providers
  • Ask about assistance programs if you’re a first-time buyer
  • Negotiate where possible

Even small differences in fees can add up to significant savings.

We’re Here For Your Homebuying Needs

Closing costs are a normal and important part of buying a home. While they can feel overwhelming at first, understanding what’s included and planning ahead will help you move through the mortgage process with confidence.

At First Financial, we’re here to guide you on your homebuying journey every step of the way, from pre-approval to closing day – so there are no surprises, just smart financial decisions. If you live, work, worship, volunteer, or attend school in Monmouth or Ocean Counties in NJ and would like to learn more about the homebuying process or schedule a call with one of our mortgage experts with no commitment required, start here.

*Subject to credit approval. Credit worthiness determines your APR. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. Higher rates may apply depending on terms of loan and credit worthiness. Minimum mortgage loan amount is $100,000. Available on primary residence only. Interest Rates, Annual Percentage Rate (APR), and fees are based on current market rates, and are for informational purposes only. Mortgage insurance may be required depending on loan guidelines. This is not a credit decision or a commitment to lend. If mortgage insurance is required, the mortgage insurance premium could increase the APR and the monthly mortgage payment. See Credit Union for details. A First Financial membership is required to obtain a Mortgage and is open to anyone who lives, works, worships, volunteers, or attends school in Monmouth or Ocean Counties.

How Much House Can I Actually Afford?

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If you’re finally ready to buy a house after years of saving for a down payment, congratulations – this is an accomplishment worth celebrating. Now that you’re officially on the hunt for your dream home, you might be wondering exactly how much you should spend. You don’t ever want to be “house poor,” a situation in which you spend such a large portion of your income on homeownership – that you are not be able to afford much else. So what’s the best guidance on what is potentially the biggest purchase of your lifetime? Here’s the truth: Just because a lender approves you for a loan, doesn’t mean that figure is right for your budget.

Your Lender Doesn’t Know it All

Lenders work with the financial information you provide on paper, as well as your credit history. They won’t know how tight your budget might already feel. In other words, you are the only one who can make sure you’re not overextending yourself.

Additionally, buying a home is different from most other purchases because it requires you to look far into the future. You’re not just thinking about what you can afford right now, you’re planning for the next 5-10 years and even beyond that. Will your income change? Will you start a family or your own business? Many loan decisions are often made with the assumption that everything in your financial life will go perfectly. Unfortunately, that’s not how real life works. It’s important to leave yourself some financial breathing room, and plan for the unexpected.

Don’t Count on Future Salary Increases to Make it Work

Even if you’re not earning a large income yet, lenders could still approve you for a bigger mortgage than you might be ready for. Counting on future raises can leave you stretched too thin today. The smarter move is to buy a home that fits your current budget. Your home should not only be a comfortable place to live, but it should also be a place you can comfortably afford.

Be Cautious with Loan Terms

When you first start shopping for a home loan, you may come across different types of mortgages – and it’s important to understand exactly what you’re signing up for. For most buyers, the safest bet is a 30-year fixed-rate mortgage. With this type of loan, your interest rate stays the same for the entire life of the loan. That means your monthly principal and interest payments will remain consistent for three decades, making it easier to plan and budget for the long haul.

Think Beyond Your Monthly Payment

When you think about how much you’ll owe every month as a homeowner, it’s easy to focus just on your monthly mortgage payment – but homeownership actually includes much more. You’ll need to pay property taxes, homeowner’s insurance, utility bills, maintenance, and potential repairs – and that’s not the end of it. We recently published a blog discussing some common expenses associated with homeownership, so that you can more accurately budget for the “true cost” of your home.

How Do You Figure Out What You Can Afford?

Know Your Why: Start with your personal goals. Are you looking to stop renting, start building equity and put down your roots? Do you want to settle down in a specific neighborhood or school district? Your “why” will shape your decision just as much as your finances.

Set a Real Budget: One of the best tools to help you get started, is a home affordability calculator which includes taxes and insurance. There are some great examples of mortgage comparison and budget calculators available on our website.

Beyond online tools, take a closer look at your real-life spending. How much of your income goes to necessities? What if anything, are you saving? Do you have other debt? Many of us don’t have a real picture of how much we’re spending every month on non-essentials, and being aware of that is one of the best ways to save for what really matters.

Additionally, mortgage interest rates impact how much house you can afford. Right now, rates are hovering around 6.8% nationally, which may feel steep compared to the lower rates we saw just a few years ago.  Historically, 6% is an average mortgage rate. The key is to determine what monthly payment feels most comfortable for you.

Research: Your personal finances are only one part of the equation. Local real estate markets vary widely, so it’s important to thoroughly look into the details of the area where you’re looking to make your home purchase. Research real estate trends, property taxes, and the availability of homes within your price range.

Also consider expanding your search area. Some “hidden gem” neighborhoods might offer better value than the ones the majority are targeting. Working with a trusted real estate agent and/or a financial planner can help you make smart choices and stay grounded.

First Financial is here to help you navigate the homebuying process and buy the right house for you, so you can turn your house into a home without financial strain. If the area you’d like to call home is within Monmouth or Ocean Counties in New Jersey, you can begin our mortgage application process online – or get a pre-approval if you’re just starting to shop.* You can also visit a local branch, call 732.312.1500 – Option 4, or complete our quick inquiry form and a mortgage expert will set-up a phone call to answer your homebuying questions (no commitment required). Happy house hunting!

Article Source:

https://www.crossstate.org/about/communications/blog/how-much-house-can-i-afford/

*APR = Annual Percentage Rate. Subject to credit approval. Credit worthiness determines your APR. Rates quoted assume excellent borrower credit history and are for qualified borrowers. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. Higher rates may apply depending on terms of loan and credit worthiness. Minimum mortgage loan amount is $100,000. Available on primary residence only. The Interest Rates, Annual Percentage Rate (APR), and fees are based on current market rates, are for informational purposes only. Rates and APRs listed are based on a mortgage loan amount of $250,000. Mortgage insurance may be required depending on loan guidelines. This is not a credit decision or a commitment to lend. If mortgage insurance is required, the mortgage insurance premium could increase the APR and the monthly mortgage payment. See Credit Union for details. A First Financial membership is required to obtain a Mortgage and is open to anyone who lives, works, worships, volunteers, or attends school in Monmouth or Ocean Counties.