Whether you are a first-time home buyer or not, buying a home is an exciting and significant decision. But before you dive into furniture shopping, picking out a new paint color for your living room, or redesigning your backyard, be sure to budget for closing costs.
Closing costs are taxes and fees associated with the sale of a home, such as title insurance and loan fees. Let’s break down what closing costs are in Arkansas, who pays them, and what you can expect to pay as a buyer and seller.
What are the average closing costs in Arkansas?
Homebuyers need to pay closing costs before getting the keys to their new home. As a general rule of thumb, you can expect closing costs in Arkansas to be 2%-5% of the purchase price. But it’s important to remember that this is just a range and the total amount will depend on a variety of factors, such as the buyer’s loan, negotiations with the seller, or the Arkansas city where the home is located.
Let’s say you’re buying a home in Little Rock, where the median sales price is $245,500. Based on this, you can expect closing costs to be between $4,910 and $12,275. However, if you buy a home in Hot Springs, where the average sales price is $165,750, closing costs could range from $3,315 to $8,288.
Who pays closing costs in Arkansas?
In most areas, including Arkansas, both the buyer and seller will pay closing costs. However, the amount of closing costs for each party will vary based on how much they need to pay. Another thing to keep in mind is that buyers typically pay closing costs out of pocket, while sellers’ closing costs are typically deducted from the home sale proceeds.
Arkansas buyer closing costs
For Arkansas home buyers, you can expect to pay 2%-5% of the purchase price. If you pay a security deposit (usually 1%-3% of the home price), this amount will be deducted from your closing costs. Here are some common closing costs that buyers typically bear:
- Assessment fee: Your mortgage lender will require a home appraisal to make sure the home is worth equal to or greater than the loan amount. A home appraisal typically costs between $300 and $500, depending on location. If you pay at the time of service, it will not be included in your closing costs.
- Inspection fees Home inspection fees generally range from $300 to $500, with costs varying based on local rates and the specific characteristics of the property. If you did not pay for the inspection at the time of service, you will need to pay it at closing.
- Loan origination fee: Most lenders will charge you a loan fee. Be sure to check with your lender what this fee covers and whether it can be waived or negotiated.
- Loan processing fee: In addition to the origination fee, your lender may charge fees to process your loan. This typically covers coverage and related services. It is recommended to discuss this fee with your lender to see what is covered and if it may be waived.
- Loan discount points: If you purchase discount points to lower your interest rate, you’ll pay a one-time fee at closing. These points can lower your rates by 0.25% to 0.5%, but consider your long-term homeownership plans before paying the reduced rate.
- Private Mortgage Insurance (PMI): If the down payment is less than 20%, PMI may charge an upfront fee at closing, depending on the loan type. It is usually part of your monthly payment, but some loans offer the option of paying it as a one-time fee.
- Title Insurance: Title insurance is a one-time closing cost, and the buyer usually pays for both the lender and the owner’s policy.
- Home Insurance: In Arkansas, your annual homeowners insurance premium may be part of your closing costs.
- Homeowners Association Dues: If your property is part of a homeowners association, you may be required to pay one month’s dues upfront at closing. These fees vary and add to maintenance and operating costs.
- property tax: As part of your Arkansas closing costs, you may be required to prepay a portion of your property taxes at closing.
Arkansas seller closing costs
Closing costs borne by Arkansas sellers can vary, but here are some common fees and costs borne by sellers:
- Real estate agent commission fees: These fees can be a significant cost for sellers. Commission fees may vary and are subject to negotiation. Sellers should discuss their options with an agent.
- Homeowners Association Fees: The seller is typically responsible for any unpaid HOA fees or assessments prior to the settlement closing date, and they may be required to provide HOA documents to the buyer as part of the sale.
- property tax: Any outstanding property taxes will be due at this time. However, if the seller prepaid property taxes after the closing date, they may receive a refund for the portion that was paid but will not be used.
- Title Insurance: As part of the Arkansas seller closing costs, the seller may pay for owner’s title insurance. Typically, this cost is based on the sales price of the property.
- Transfer tax: If you sell your home in Arkansas, you’ll need to pay the real estate transfer tax levied by the state. These taxes are usually calculated based on the property’s sales price or assessed value. Specific rates and regulations can vary widely, so it’s important to understand the requirements in your area and consider these potential costs when selling your home.
Median home sales price data from the Redfin Data Center for July 2024.
