Closing costs, also called settlement costs, is the collective term used to refer to all the fees and charges that homebuyers and sellers are obligated to pay at the closing, or settlement, of a home purchase. When it comes to closing costs in Boston MA, it is the buyer who is responsible for most of the closing costs. However, this is not set in stone. The buyer may negotiate with the seller to shoulder some, or even all, of the closing costs.
In Massachusetts, closing costs range between $8,000 and $12,000. A homebuyer may apply for a mortgage loan that involves no closing costs, sometimes referred to as no-closing-cost refinance, but this type of loan will entail a slightly higher interest rate. In effect, the home buyer’s monthly mortgage payment will increase. If you don’t have the cash for closing costs, this loan can help, but another option is to structure the offer so that the seller is providing the buyer with a closing cost credit, sometimes referred to as a seller concession.
If you are planning to purchase a house in Boston, MA, hiring a licensed and experienced real estate professional will be instrumental in helping you achieve the best deal out of your real estate transaction. A realtor can provide you with an accurate estimate of what to expect to pay in closing costs and ensure that you are properly guided all throughout the process.
Common Closing Costs for Boston, MA Home Buyers
Here are the costs associated with buying a Massachusetts home, also regarded as homebuyer closing costs:
After buying your new home, you will be responsible for paying the property tax from the purchase date up to the end of the year.
The escrow fee is $2.00 for every thousand dollars of the home purchase, plus $250 on top of the total fee.
Home inspection is necessary to ensure there are no issues with the property you are interested in purchasing. This costs between $400 and $800.
Title Company Search
A title search is essential in ensuring that no one else has any claim on the property you are buying. Usually, it is the lender’s attorney who performs this, and the cost will depend on the home you are buying and the company you use. This fee is typically rolled into the closing costs on the loan charged by the lender.
This fee varies, depending on the county where your new home is located. The county will then make the purchase part of the public record.
Owner’s Policy Title Insurance
Title insurance is your protection in case someone claims ownership over the property that you are buying. Costs vary by insurer, and it is the lender which will carry the insurance. However, you have the option to pay for title insurance that will cover you as well.
This is necessary to determine whether your new home is located in a flood zone or not. The cost is usually around $20.
Fees Associated with Financing in Boston, MA
When you borrow money to pay for your new Massachusetts home, you will encounter these additional fees associated with taking out a loan:
Mortgage Application Fee
The mortgage pre-approval is a letter that states how much the lender feels you can borrow. And will be used to show your financial strength to a seller.
Credit Report Fee
Having a good credit score is essential and the lender will be requesting a credit report to determine what type of risk you present so they can accurately compute for your loan amount and interest rate. This costs about $30 and is typically wrapped into the costs associated with granting you the loan.
Your lender needs to verify that the house you are buying is actually worth what you are paying for it so, in case you default on the loan and the lender needs to sell it for payment, the property will sell for enough money to cover the loan amount. This fee ranges from $300 to $500 and is typically wrapped into the cost of getting a mortgage.
This involves the cost of all the paperwork required for your home loan. Processing fees amount to around $1,000 and will also be wrapped into your loan costs.
Lender’s Policy Title Insurance
This is a mandatory fee, and the cost will vary by company. This insurance is proof that you are the owner of the house and that the mortgage is legitimate.
This fee is charged by your lender for reviewing, or underwriting, your loan application. The underwriting fee can cost as much as $795 and is also rolled into the total cost of obtaining a mortgage.
Prepaid interest charges refer to any daily interest that accrues on your loan between the date you close on your mortgage loan and the period covered by your first monthly mortgage payment. The actual cost will vary based on your total loan amount and interest rate.
Private Mortgage Insurance
Also referred to as PMI, this type of insurance is designed to protect lenders against you defaulting on the loan. The average rate for mortgage insurance is around $50 per $100,000 of the loan.
This survey is done by the lender to ensure that the property you are buying conforms to local zoning laws. The cost will be a few hundred dollars and is also going to be part of the buyer’s financing costs.
Typical Home Seller Closing Costs in Boston, MA
In Massachusetts, there are five major closing costs that are typically paid by the seller. First, the real estate agent’s commission, which is usually 5% to 6% of the home price. Another seller closing cost is the real estate attorney’s fee, and this ranges between $800 and $1100. Third cost is state excise tax stamps, which are roughly 0.456% of the home price. Smoke and carbon monoxide detector certificate, typically costs around $50 to $100. And septic expenses (if applicable), which cost around $800.