Even after months or years have been spent saving up for a down payment to buy a home, some Philly residents who are looking to buy might not be ready to take on the extra expense of closing costs. These additional costs can quickly pile up and can be surprising when starting to search for a home. To help buyers get ready for the amount of expense that could come with purchasing a home, this article will look at common closing costs in Philadelphia for homebuyers who are considering a move.
Buyers should expect to pay between four and six percent of a purchase price in closing fees when they are buying a home in this area. Though it sounds like quite a bit, it is common for closing costs to be especially high in major cities.
What Are the Typical Costs for Closing in Philadelphia?
Possible fees include:
- Realty Transfer Tax
- Title Insurance
- Appraisal Fee
- Homeowner’s Insurance
- Home Inspection Fee
- Loan Origination and Underwriting Fees
The Commonwealth of Pennsylvania collects one percent while the city of Philadelphia collects 3.278 percent. It is typical for the seller and buyer to evenly share the transfer taxes. In many instances, the buyer will pay 2.139 percent while the seller will pay the other half. The exception comes in the case of buying a foreclosure, in which case you’ll likely pay the entire percentage. Reality transfer taxes able to be paid with a property deed have been filed with the State Records Department.
Title Insurance
If you are buying a home with a mortgage, you’ll need to get title insurance since the bank will require it. The cost will vary depending on who provides the insurance, but the current estimates are between .5 percent to .75 percent of the purchase price. Title insurance will protect the buyers and lenders against any claims on the property title before you owned the property. Unpaid property taxes or liens on the property can be two potential issues that the title insurance will spare you and your bank. Though it may seem pricey, a mortgage company likely won’t lend you any money without it.
You can offset some of your closing costs when you buy a home in Philly. When you choose the right real estate investment, many time that we buy houses company covers sellers closing costs, and you can contact our real estate investor company team — as we cover sellers closing costs.
Loan Origination and Underwriting Fees
These two fees are administrative fees that are needed to process your application as well as any necessary review. The fees tend to be between .5 percent and one percent of the total loan. There are behind the scene moving parts when a bank reviews the mortgage application, and these two fees are supposed to cover those activities. It is important to ask about the fees beforehand so that you know what you’re walking into before you chose a lender.
Appraisal Fee
Banks and mortgage lenders will require an appraisal before they move forward with a home loan. The reason being is that your home becomes collateral for the mortgage. A lender will want to know that the property is appraised for at least the price of the purchase. The cost of an appraisal in the city is usually between $400 and $700, though this is dependent on the company the lender uses for appraisal.
Home Inspection
It is recommended that you get an inspection when you buy a home. A professional, licensed inspector will help you make sure there are no major issues with the property before you buy. The home inspection could cost between $300 and $1,000, only hitting the high end of the range if you need a special system inspected or tested. Budgeting for $500 is recommended.
Homeowner’s Insurance
There are factors that affect the cost of homeowner’s insurance, including the size of the mortgage, the price of the home, liability coverage, deductible amounts and the replacement cost of the home. You can get quotes from local insurance agents in order to understand what to expect as well as what each coverage amount will entail. The premiums may vary, ranging from $750 to $2,500 depending on what kind of coverage you need.
How Can Buyers Offset Closing Costs?
Unfortunately, these fees are a part of the home buying process. Buyers should make sure they are prepared when it comes time to make an offer on the home. Still, you can offset a big portion of the closing costs with a commission rebate from the buyer’s broker. FastCashAnyHome is a digital buying platform that rebates up to 2/3 of the broker’s commission that it gets by representing a buyer.
The concept of a commission rebate is explained by a buyer’s broker giving back a portion of their commission as a refund when they are representing you during a purchase. Plus, the commission rebates are legal in 40 states, including PA.
FastCastAnyHome’s Smart Buyer Rebate is the largest commission rebate currently available in Philly, but not charging any fees or commissions. Furthermore, buyers may benefit by way of a seamless buying experience as well as the advice of expert realtors that are there every step of the way.
Estimating Closing Costs
To estimate the price you can expect to pay, you can ask your realtor and your mortgage professionals questions while searching for a new home. They should both be able to give you a breakdown of the closing costs and an itemized list based on various factors like average tax amounts, your budget, local service fees and more. This will help you to better prepare when buying a home.
Typical Closing Cost Estimates:
- Pennsylvania Realty Transfer Tax — $3,750
- Philadelphia Realty Transfer Tax — $12,293
- Home Inspection — $500
- Appraisal Fee — $600
- Loan Origination & Underwriting Fees — $4,500
- Homeowner’s Insurance — $2,200
- Title Insurance — $3,750
- Total — $27,593
FastCashAnyHome is on a mission to help you save money while selling a home.
