Congratulations! You are just steps away from completion of your new home. But there’s one final step before closing is official: paying closing costs.
Closing costs are the fees and expenses associated with completing a real estate transaction and transferring ownership of the property from seller to buyer. 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 Virginia, who pays them, and what you can expect to pay as a buyer and seller.
What are the closing costs in Virginia?
In addition to a down payment, homebuyers also need to pay closing costs to get the keys to their new home. As a general rule of thumb, you can expect closing costs in Virginia 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 purchase price of the home, the type of loan and any adjustments negotiated with the seller.
For example, if you buy a home in Richmond, where the average sales price is $424,995, closing costs may range from $8,500 to $21,250. Or, let’s say you want to buy a home in Virginia Beach, where the median sales price is $398,000. Closing costs on a home here can cost you between $7,960 and $19,900.
Who pays closing costs in Virginia?
In most areas, including Virginia, both the buyer and seller will pay closing costs. But buyers and sellers will pay different closing costs and may have different total closing cost amounts. Another thing to remember is that buyers typically pay closing costs out of pocket, while sellers’ closing costs are typically deducted from the home sale proceeds.
Virginia buyer closing costs
Closing costs for Virginia buyers typically range from 2%-5%. If you pay a deposit, this amount will be deducted from your closing costs, which will reduce the total amount you owe at closing. The deposit is usually 1%-3% of the house price. Let’s take a closer look at some common closing costs that buyers pay:
- Appraisal fee: Home appraisals typically range from $300 to $500 and are usually paid separately at the time of service. However, if not, you will need to pay a fee at closing.
- Inspection fees: A home inspection in Virginia typically costs $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: Some lenders charge a fee to create the loan. When you’re shopping around for a lender, ask what they cover and if you can negotiate to avoid high fees.
- 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 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): 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: Your annual home insurance premium may be included in your closing costs in Virginia.
- Homeowners Association Dues: If your property is part of a homeowners association, you may be required to pay one month’s dues up front at closing. These fees vary and add to maintenance and operating costs.
- property tax: Buyers may have to pay property taxes upfront as part of Virginia closing costs.
Virginia Seller Closing Costs
Seller closing costs will vary per transaction in Virginia, 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: Owner’s title insurance is another common closing cost paid by the seller in Virginia.
- Transfer tax: If you sell your home in Virginia, you are subject to state-imposed real estate transfer tax. 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 property.
Median home sales price data from the Redfin Data Center for July 2024.
