Buying a new home is an exciting and big decision, whether it’s your first home or your third. But before you dive into buying new furniture or appliances, be sure to budget for closing costs.
Closing costs are the final fees paid to complete a real estate transaction, such as taxes, lender fees, and title insurance. Don’t worry if you feel unprepared or overwhelmed. To help you budget for closing costs, this Redfin article will explain how much closing costs are in Washington state, who pays them, and what you can expect to pay as a buyer and seller.
How much does it cost to close in Washington?
Homebuyers need to pay closing costs before getting the keys to their new home. Closing costs in Washington typically range from 2% to 5% of the home purchase price. But it’s important to remember that this is just a range and the total amount will depend on many factors, such as the purchase price of the home, the type of loan and any adjustments negotiated with the seller.
Let’s say you’re buying a home in Seattle, where the median sales price is $885,000. Based on this, you can expect closing costs to be between $17,700 and $44,250. However, if you buy a home in Tacoma, where the average sales price is $481,600, closing costs could range from $9,632 to $24,080.
Who pays closing costs in Washington State?
In most areas, including Washington, 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.
Washington buyer closing costs
Closing costs for Washington buyers typically range from 2%-5%. In most cases, you will pay a deposit, usually 1% to 3% of the home price, once the two parties come to an agreement during the home buying process. This deposit will be deducted from your closing costs, reducing the total due at closing. Here are some common closing costs buyers pay:
- 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: Although not required, a home inspection is highly recommended. The cost of a home inspection generally ranges from $300 to $500 and is usually paid at the time of service. However, if not, payment will be required 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: Lenders may also charge a fee for loan processing, including underwriting and related services. Similar to the origination fee, check with your lender to understand its purpose and possible exemptions.
- Loan discount points: If you buy points to get a lower interest rate, you’ll usually pay a one-time fee at closing. Each point can lower your rates by 0.25% to 0.5%. Before purchasing points, consider your long-term plans, such as how long you plan to own the home or whether you plan to refinance.
- Private Mortgage Insurance (PMI): When your down payment is less than 20%, you usually have to pay PMI. Some loans allow PMI to be paid upfront at closing, giving you the option of a higher upfront cost or increased monthly payments.
- Title Insurance: Title insurance is a one-time fee paid as part of the closing costs. Buyers often carry both lender and owner title insurance.
- Home Insurance: In Washington, your annual home insurance premium may be part of your closing costs.
- Homeowners Association Dues: For homes in HOA-managed communities, you may be required to pay one month’s dues upon closing, which may vary by property and cover maintenance and operating expenses.
- property tax: Buyers may have to pay property taxes upfront as part of their closing costs in Washington.
Washington Seller Closing Costs
Closing costs for sellers in Washington will vary per transaction, but here are some common fees and costs sellers incur:
- 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: If the property is part of an HOA, the seller may be required to pay various fees. These fees may include HOA transfer fees, outstanding payments, and fees that may be incurred to obtain the HOA documents required by the buyer. The exact fees will depend on the HOA’s rules and regulations.
- 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 a Washington seller’s 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: Depending on location and local regulations, Washington sellers may be subject to state transfer taxes as well as potential local transfer taxes. Transfer taxes are usually calculated based on the sales price of the property and are imposed when ownership of the property is transferred from the seller to the buyer.
Median home sales price data from the Redfin Data Center for July 2024.
