Decoding Closing Costs: What to Expect When Buying a Home in Oregon or Washington
So, you’re ready to buy your dream home in the beautiful Pacific Northwest? Congrats! As a mortgage broker, I get to help people navigate this exciting process all the time. But let’s be real, closing costs can be a bit of a mystery. What are they, exactly? And how much should you budget for?
Think of closing costs as the final hurdle in your home buying journey. They’re the fees and expenses you pay to finalize your mortgage and officially become a homeowner. Here’s a breakdown of some typical closing costs in Oregon and Washington:
One-Time Costs (You pay these just once at closing):
- Appraisal Fee: This covers the cost of a professional appraiser determining the fair market value of the property you’re buying. Lenders require this to make sure the home is worth what you’re paying for it.
- Loan Origination Fee: This fee compensates your loan officer/broker. Sometimes this fee isn’t directly charged to the borrower – but rather built into a higher rate.
- Title Insurance and Escrow Fees: Title insurance protects you and the lender from any issues with the property’s ownership history. Escrow fees cover the services of a neutral third party who holds funds and documents until all closing conditions are met.
- Prepaid Interest: You’ll likely need to prepay interest for the period between closing and your first mortgage payment.
- Discount Points (Optional): You can choose to pay discount points upfront to lower your interest rate over the life of your loan.
Recurring Costs (You’ll pay these regularly over time):
- Property Taxes: These are annual taxes levied by your local government. A portion of your property taxes will likely be collected upfront at closing to establish your escrow account.
- Homeowners Insurance: Your lender will require you to have homeowners insurance to protect your property from damage or loss. You’ll usually pay the first year’s premium at closing.
- Private Mortgage Insurance (PMI): If your down payment is less than 20%, you’ll typically be required to pay PMI, which protects the lender in case you default on your loan. This is usually paid monthly as part of your mortgage payment.
Important Notes:
- These are just some of the most common closing costs. The specific costs and amounts can vary based on your loan type, lender, and the property you’re buying.
- It’s crucial to get a Loan Estimate from your lender early in the process. This document outlines the estimated closing costs and loan terms, helping you budget effectively.
Don’t hesitate to reach out if you have any questions about closing costs or the home buying process in general. I’m here to help you every step of the way!
