Whether it’s your first rodeo or not, buying a new home is a big and exciting decision. But before you dive into furniture shopping, picking out new colors for the bathroom, or redesigning the backyard, you need to budget for 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 Massachusetts, who pays them, and what you can expect to pay as a buyer and seller.
What are the closing costs in Massachusetts?
Homebuyers need to pay closing costs before getting the keys to their new home. On average, closing costs in Massachusetts typically range from 2%-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 buyer’s loan program or negotiations with the seller.
Let’s say you want to buy a home in Boston, where the median sales price is $797,000. Based on this, you can expect closing costs to be between $15,940 and $39,850. However, if you buy a home in Milton, where the average selling price is $955,000, closing costs could range from $19,100 to $47,750.
Who pays closing costs in Massachusetts?
In most areas, including Massachusetts, 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.
Massachusetts buyer closing costs
Closing costs for Massachusetts 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. 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 fee: 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 Massachusetts, 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 pay one month’s dues up front when you turn in the house. These fees vary and add to maintenance and operating costs.
- property tax: As part of your Massachusetts closing costs, you may be required to prepay a portion of your property taxes at closing.
Massachusetts Seller Closing Costs
Closing costs for sellers in Massachusetts can vary, but here are some common fees and costs sellers pay:
- 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: The seller is responsible for any property taxes accrued but not yet paid prior to the closing date. These unpaid property taxes are usually prorated based on the months you owned the property.
- Title Insurance: Owner’s title insurance is another common closing cost paid by the seller in Massachusetts.
- Transfer tax: Depending on location and local regulations, Massachusetts sellers may be responsible for 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.
