When purchasing a home, buyers expect to pay a down payment and often budget for it accordingly.
However, there are several other expenses that must be kept in mind before beginning the home buying process. One expense that Georgia home buyers must prepare for are the closing costs.
What Are Closing Costs?
The final step of buying a home before being handed the keys is the closing process. Data from Bankrate shows that Georgia buyers pay an average of $2,323 at their closing.
Although that does not sound like a large amount of money when you consider the price of a house, that particular study did not account for other fees that are due at closing, such as title insurance, taxes, escrow fees and title search fees(1).
Who Pays Closing Costs In Georgia?
Neither the buyer nor the seller are typically responsible for 100% of the closing costs. Sellers might pay between 5% and 10% of the home’s sale price for closing costs.
As a general guide, closing fees for buyers amount to anywhere from 2% to 5% of the sale. On the median home value in Atlanta of $261,200, buyers can expect to pay somewhere in the range of $5,000 to $13,000 in closing costs(2).
What Is Included In Closing Costs In Georgia?
Although closing costs can vary according to the property’s condition and value as well as certain lender requirements, there are some costs that will be incurred in every home sale in the state.
The Appraisal Fee
Lenders will not move forward with a home loan without a professional appraiser valuing the property first.
This ensures that the price the buyer is paying represents a fair market value and protects the lender’s investment. Although the price of an appraisal can vary, the national average is $333.
Home Inspection Fees
Home inspections are not required when purchasing a home in Georgia. However, many people choose to get one to avoid financial devastation should unforeseen issues arise in the home that require expensive repairs.
Unlike some other states, Georgia requires an attorney to sign off on all real estate transactions at closing.
The attorneys’ fee covers reviewing the closing documents and amounts to around $721 on the purchase of a $200,000 home, according to Bankrate.
The Application Fee
Buyers must pay lenders a fee for processing their loan application. This may include credit checks and other fees, so it is important to discuss with your mortgage broker or lender what is involved in this fee.
Another fee due at closing is the cost of a title search and transfer to ensure that the property in question does not have any claims against it and that legal ownership of the property transfers successfully from the seller to the buyer.
A title insurance policy can be used to protect the buyer’s investment should someone challenge their ownership of the property in the future.
In order to obtain a lower interest rate, some home buyers in Georgia choose to pay for discount points up front. A discount point normally costs 1% of the home loan and can bring the interest rate down significantly.
For example, on a loan of $200,000 at an interest rate of 4.5%, purchasing two points can drop the rate to 4%, which amounts to monthly savings of $58.54.
Real Estate Transfer Taxes
When properties change hands in Georgia, like many states, real estate transfer taxes must be paid. Although these are generally the responsibility of the seller, some buyers agree to take these fees on during the negotiation phase.
The fee equates to $1.00 per $1,000 of the value of the property. Georgia also requires an intangibles tax of $1.50 per $500 on the amount of the loan and a $10 tax for any loan subject under the Georgia Residential Mortgage Act.
In addition to the closing fees, homeowners must plan for additional expenses that are due on top of their monthly payment.
For example, Georgia residents must pay property taxes each year according to their county’s millage rate and the assessed value of their property. Other fees may include homeowner’s insurance and home maintenance costs.
All of these factors must be taken into consideration when deciding if you can comfortably afford a particular home.
Reach Out To The Experienced Georgia Mortgage Brokers
Working with a local mortgage broker with a thorough knowledge of closing costs can ensure there are no unpleasant surprises at closing.
Planning ahead is essential to ensure you can cover all of the expenses involved in your transaction. Reach out to the experienced Georgia mortgage brokers at MyLendingPal for knowledgeable guidance through the mortgage process and a thorough explanation of all the fees that are involved in closing.