What to Know About Closing Costs When Buying a Home on Cape Cod
Buying a home on Cape Cod, MA, is an exciting journey—but it’s also a big financial decision. While you may be prepared for the down payment, many first-time homebuyers are caught off guard by the closing costs. These additional fees are part of the homebuying process, and understanding them upfront can help you avoid surprises when you’re ready to close the deal.
In this blog, we’ll walk you through everything you need to know about closing costs in Cape Cod, so you can be prepared and confident as you move forward with your home purchase.
What Are Closing Costs?
Closing costs are the fees and expenses that are paid at the closing of a real estate transaction. These costs can range from 2% to 5% of the home’s purchase price, depending on factors like your loan type, location, and the price of the property.
For example, if you’re buying a $400,000 home on Cape Cod, your closing costs could be anywhere from $8,000 to $20,000.
While this may sound like a lot, it’s essential to factor these costs into your budget early on to avoid any surprises later.
Common Closing Costs You’ll Encounter on Cape Cod
Here’s a breakdown of the most common closing costs when buying a home in Cape Cod:
1. Loan Origination Fee
What It Is: This fee covers the cost of processing your mortgage application. It’s typically a percentage of the loan amount, usually around 0.5% to 1%.
How Much You’ll Pay: If you’re taking out a $350,000 mortgage, the loan origination fee could be around $3,500.
2. Appraisal Fee
What It Is: Before the lender approves your loan, they will require an appraisal of the property to determine its market value.
How Much You’ll Pay: The cost of an appraisal typically ranges from $400 to $700 on Cape Cod, though it can vary depending on the size and location of the property.
3. Home Inspection Fee
What It Is: A home inspection ensures that the property is in good condition and that there are no hidden issues, such as foundation problems or mold.
How Much You’ll Pay: Expect to pay around $300 to $500 for a standard home inspection on Cape Cod, though more specialized inspections (like for pests or radon) could cost extra.
4. Title Search and Title Insurance
What It Is: Title insurance protects both you and your lender in case there are any issues with the property’s title, such as outstanding liens or ownership disputes. The title search is a process where a professional checks the property’s history to ensure there are no legal issues.
How Much You’ll Pay: The title search and insurance can range from $500 to $1,500, depending on the home’s value and location.
5. Attorney Fees (Massachusetts-Specific)
What It Is: In Massachusetts, it’s required to have an attorney involved in the closing process. The attorney reviews the closing documents and ensures the transaction is legally sound.
How Much You’ll Pay: Attorney fees typically range from $700 to $1,500 on Cape Cod.
6. Prepaid Property Taxes
What It Is: You may be required to prepay property taxes for the current year at closing, depending on the timing of your purchase and local tax rules.
How Much You’ll Pay: Prepaid property taxes can vary widely based on the property’s value, but typically they range from $500 to $2,000.
7. Homeowners Insurance
What It Is: Most lenders will require you to secure homeowners insurance before closing to protect the property from damage or loss. Often, the first year of insurance will be paid at closing.
How Much You’ll Pay: Depending on the property, homeowners insurance typically costs $600 to $1,500 per year on Cape Cod.
8. Escrow Fees
What It Is: Escrow fees cover the cost of the escrow service, which holds funds and ensures that all conditions of the sale are met before money is transferred.
How Much You’ll Pay: Escrow fees can range from $500 to $2,000, depending on the complexity of the transaction and the services provided.
9. Recording Fees
What It Is: Recording fees are charged by the county to officially record the sale of the property with the local government.
How Much You’ll Pay: On Cape Cod, you can expect to pay $100 to $250 in recording fees.
How to Prepare for Closing Costs
Now that you know what to expect, here are a few tips to help you prepare for closing costs:
Save Early: The earlier you start saving for closing costs, the better. Most people underestimate the amount of money they’ll need at closing, so try to save at least 3% to 5% of the home’s purchase price in addition to your down payment.
Get a Loan Estimate: Your lender will provide you with a Loan Estimate within three days of applying for a mortgage. This document will outline your estimated closing costs, so be sure to review it carefully.
Negotiate with the Seller: In some cases, you may be able to negotiate with the seller to cover part of the closing costs, especially in a buyer’s market. This is called a seller concession, and it can help reduce the amount you need to pay upfront.
Look for First-Time Homebuyer Programs: If you’re a first-time homebuyer in Massachusetts, you may qualify for programs that help with closing costs. For example, the MassHousing program offers down payment assistance and may provide options to help cover closing costs.
Shop Around for Services: You can often shop around for services like home inspections, title insurance, and homeowners insurance. Comparing prices can help you save money on your closing costs.
Closing costs are an inevitable part of the homebuying process, but with a little planning and knowledge, you can avoid surprises. By understanding what closing costs you’ll encounter and how to prepare for them, you’ll be ready to close the deal on your new home on Cape Cod with confidence.
If you’re ready to start the homebuying process on Cape Cod, contact me for personalized guidance, or explore listings in your price range. I am here to help you make your dream home a reality, and I will guide you through every step, including the all-important closing costs!