Home Buyer’s Closing Cost Report 2021
Closing costs, let’s face it, are not one of the most looked forward to aspects of buying a new home. They’re technical, involve multiple complex parties, and potentially put another dent in your wallet. So who’d want to talk about that too much when they could be thinking about their dream home kitchen instead?
But understanding how buyer’s closing costs work can pay off big in the end. You’ll want to budget for them and know how to work with your real estate agent to get the best deal you can. If you’ve done any basic searching around for what you should expect to pay, you may see most sources quote the same figure: 2 to 5% of the sale price. And that’s not necessarily inaccurate, but it also isn’t terribly specific to Portland home buyer closing costs.
So today we’ll jump into some of the nitty gritty of what we’ve seen buyer’s closing costs look like so far in 2021.
What Do Buyers Pay in Closing Costs?
Before we get to hard numbers, let’s look at a breakdown of what you can expect to see when you get your first look at your closing costs.
- Loan Charges. A good portion of what buyers pay when closing on a new home goes to the banking institution that’s lending the money. You might see this lumped together as an “origination fee” for the loan. Or it might look more like an itemized list that can include separate charges like an application fee, a processing fee, an underwriting fee, etc. Typically these will run about 0.5 – 1% of the entire loan amount, so they make up a significant portion of closing costs.
- Title Charges and Escrow. Typically in Portland sellers and buyers split the cost of escrow, which for a $500,000 home is about $860 each right now. In addition to that though, you’ll likely see other fees related to the title company, which acts as a middle party between you and the seller to protect everyone’s rights (and money). The title search they run ensures to the best of their knowledge that there are no outstanding issues with the home, such as a property dispute. Your title fee will also help cover lender’s title insurance (nearly always purchased by the buyer and separate from the title insurance amount paid by the seller).
- Taxes and Miscellaneous Fees. Property taxes vary greatly depending on your county and the assessed value of the home. A big bulk of home buyer closing costs are paying advance property taxes. You can expect to pay in closing costs half the total property taxes for the year in advance for that property. Other items you might find listed include HOA fees if applicable, government recording fees, and home warranty policies.
How Much Are Closing Costs for Buyers in Portland in 2021?
As we mentioned above, the typical 2% to 5% often cited is a general number that’s used across the US. And it’s a good rule of thumb, especially because you want to make sure you’ve budgeted accordingly. If you end up at that 5% mark, for a $500,000 home you’re looking at a bill of $25,000. Not insignificant!
But we wanted to take a closer look at what those numbers have looked like specifically in Portland at the start of 2021. Examining some recently sales in the area, we found that title fees typically ran about $1700. As for loan charges, they did indeed hover around 0.5 to 1% of the loan amount. Keep in mind this does not include the down payment. Often, but not always, the higher the down payment, the less you’ll pay for the lender’s origination fee.
All in all, we found that for most sales, the buyer’s costs come in at about 2% before you add in property taxes. After adding in the home buyer paying half of property taxes upfront, the closing costs jump to 3 – 4%.
Does the Seller Pay Part of the Buyer’s Closing Costs?
You might have heard that sellers are obligated to pitch in to help cover the buyer’s closing costs. However, while sometimes it works out this way in negotiations, it’s by no means an expectation. That doesn’t mean it’s not an option, though, and it can be a way to eke a little more wiggle room out of your finances, especially for a first time home buyer. Don’t expect a seller to be willing to pay buyer’s closing costs when the market is in their favor, but if you can find a home that has been sitting on the market a while, this can be a real option.
Let’s check out a hypothetical example. Say a home buyer is close to buying that $500,000 dream home we keep referencing, and their closing costs are projected to come in at about 3%. That’s $15,000. Now let’s say their agent negotiates that the owner pays half – now the buyer is down to 1% closing costs and has $7,500 another in the bank. With this extra room in their finances, they could potentially purchase mortgage points.
Mortgage points are essentially points you purchase from the bank upfront in order to lock in a lower mortgage rate for the life of the loan. Typically each point costs 1% of the home price, and knocks off about a quarter of a percent in interest. These aren’t for everyone. But if our hypothetical owner plans to stay in the home for long enough, they could save thousands in the long run.
How to Navigate Closing Costs As a Home Buyer
Whether it’s your first time buying a home or not, closing costs can feel byzantine and opaque. The best thing you can do is to educate yourself. But it helps to have a guide along the way! Say a seller is motivated and wants to expedite the sale for any reason. You’ll want someone on your side to help negotiate the smartest deal. Having an experienced and dedicated real estate agent will put your mind at ease – when in doubt, call an expert!
Our top 1% buyer’s team prioritizes customer service and is full of top-ranked, local industry veterans ready to help you find the home of your dreams. If you’re thinking of buying a home in Portland, call us today at 503-773-0000!February 24, 2021