Buying a home is often the most expensive purchase a person makes in their lifetime. It is important to have a realistic budget in mind when starting the negotiation process.
Closing costs can throw an unexpected wrench into the situation. Sometimes they are thousands over what home buyers expected. You need to know how much is closing cost in Nevada before going into the home buying process. Keep reading to get the answer.
What Are Closing Costs?
Closing costs are the fees that go to several different service providers and vendors. This includes home inspectors, attorneys, appraisers, and escrow agents. These add on top of the property’s price to make the total amount of the final sale.
They are split between the buyer and the seller and can sometimes be negotiable. Usually, the homebuyer pays somewhere between 2 to 5 percent of the purchase price, but this varies by situation.
There are many factors that impact closing costs, two main ones being the location and the property’s assigned value.
The closing costs aren’t collected until the transaction is complete and the property title transfers, so this can leave closing costs to be a surprise in some situations. This doesn’t have to be, nor should it be the case, though.
There are tools to help with how to estimate closing costs. Law requires lenders to provide a “good faith estimate” no later than three days after receiving a home loan application.
In addition to this, the Housing and Urban Development Department requires that lenders estimate all third-party fees within 10 percent of the final cost. This has helped with providing realistic good faith estimates to buyers.
Loan Origination Fees
These are fees lenders charge for the work that goes into processing a loan application. They can sometimes be negotiable, but that is often in exchange for a higher interest rate over the life of the loan.
They are usually around 0.5 to 1 percent of the loan amount.
This is an option fee for a one-year warranty of the home. The seller can choose to pay for this, which averages $400 in Nevada.
Form 1099 Charge
This fee is for the form required by the IRS to report the sale of a property. The seller usually pays for this, which costs $25 to $50.
Home inspections help the buyer feel satisfied with the property before entering negotiations with the seller. Inspections can find issues with the structure or functional components of the house.
Assessments include the roof, ceilings, pillars, walls, plumbing, HVAC, and smoke detectors. You will get a detailed report after the conclusion of the inspection that will alert you to any troubling situations with the house.
Discount points, also referred to as mortgage points, are fees that a homebuyer can pay directly to the lender for a reduced interest rate. The idea is that you can pay some interest upfront in exchange for a lower interest rate on the loan.
Each point will cost 1 percent of the total loan amount. Points can be negotiable but are often paid by the buyer.
Lenders like to make sure the money they are lending isn’t going to a property that has significant issues. They want to minimize any risk that might make collecting payment a hassle. As a result, they often mandate appraisals where a licensed appraiser looks at the property checking for structural issues.
Special attention goes to areas like plumbing, wiring, and air conditioning. The average single-family home in Nevada can expect appraisal costs of around $313.
There is a title search fee for running a search that verifies the seller owns the property and has the right to sell it. To determine whether there is a clear title, it usually costs around $500 to $600.
There is a one-time fee for arranging tax payments. The lender charges them and is often around $100.
State Transfer Tax
This is a state-specific tax to cover the fees associated with transferring the title. The seller pays this fee, which is $5.10 per $1,000 of the loan value in Nevada.
Deed Recording Fees
These are the costs for recording a new deed. It is usually split between the buyer and the seller and is around $75.
A pest inspection may be included in the overall inspection costs. If a lender requires a pest inspection to be done, it can cost anywhere from $50 to $225.
Many documents need to be printed and transported during a property transaction. The fees that cover the cost of shuffling these documents range from $50 to $250.
Once you know the appraisal value of the home you want to purchase, you can estimate the property tax. Your local county should have your home appraised every couple of years to determine how much it is worth.
Multiply that amount by the property tax rate in your area. Nevada has some of the lowest tax rates in the US, with the state’s average effective property tax rate being 0.53 percent.
If a home value of $350,000 is multiplied by the average property tax rate in Nevada of 0.53 percent, that would mean property taxes would come to $1,855 per year.
Of course, the tax rate in your county could be significantly higher than the state average. Always talk to a professional to determine an accurate estimation.
Homeowners’ insurance protects against damage to the home, like fire or theft. Policies differ depending on providers and location.
A good rule of thumb is that the wider the coverage protection, the more expensive the premium will be. Mortgage companies can require buyers to put their monthly insurance payments in an escrow account. Then the escrow company will pay your insurance payment every month.
This way, lenders can minimize the risk of insurance policies lapsing due to late payments.
This can vary widely, as agent commission is always negotiable. The commonly quoted figure for agent commissions is 6 percent of the sale price, but it could be as low as 1 percent if using a discount broker.
The commission is usually paid by the seller and then split between both the buyer and seller’s agents.
Mortgage insurance is usually required when a buyer purchases with less than a 20 percent down payment. This money protects the lender if the buyer is unable to make future payments.
Your credit score, the home value, and the down payment are all factored into determining what the monthly premium will be.
A property survey is conducted to find out what the exact size and boundary lines of a property are. This way, you can try to avoid any contests over land that lies at the boundaries.
It also will shed light on any municipal law changes that may affect the perimeter of the property.
For the sale of a home to occur, the money is put into a third-party account, called escrow. The escrow company is the responsible party for making sure the money for the purchase is dispersed to the right hands after all the contractual obligations are met.
It could also be an attorney or title company performing these duties. The fees are often around $275.
This is a fee paid by the seller if they need to clear the title of any liens or other encumbrances. It usually costs $156 to complete.
How Much Is Closing Cost in Nevada: An Average
Now that you have read the many different types of fees and costs that are involved, you have a better answer to the question of how much are closing costs in Nevada.
Let’s look at an example of the average home for sale. The price for an average home is between $300,000 and $400,000. The closing costs in Nevada are usually around $4,160 to $7,395. This makes the average total for closing costs come to $5,546, which is around 1.39 to 1.85 percent of the home’s sale price.
An Alternative Option
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