So you’re ready to buy a home in Northern Virginia before you know the true cost of purchasing a home.

It makes sense to be curious about the upfront cost associated with purchasing a home.

Most buyers, particularly first-time buyers, think about how much they need for a down payment while forgetting about the additional fees.

Closing cost is the hidden fee that can ruin your chances of purchasing a home.

Don’t worry because, in this article, I’ll break down what buyer closing costs you can expect and estimate how much money you will bring to the closing table when you buy a home in Northern Virginia.

The closing costs associated with purchasing a home can be broken down into six categories.

Downpayment
Loan Charges (the cost to obtain a mortgage)
Impounds (prepaids held in escrow)
Title Fees (title insurance, settlement charges, etc.)
Legislative Fees (transfer and recordation taxes)
Miscellaneous and Prepaids (inspections, etc)

In addition to explaining each one of these sections, I will also tell you the price you can expect to pay using real-world examples from my previous real estate transactions.

Plus, I’m going to use a sample property to make it easier to digest the information.

Welcome Sign Front Yard - Northern Virginia Real Estate

Hi, my name is Abraham Walker with Ask A Walker Your Northern Virginia Real Estate Agent. I’m your tour guide through Northern Buyer Closing Cost.

If this is your first time reading one of my posts, welcome.

Let’s start the Closing Cost break down by talking about your Down Payment.

Down Payment

If you’re saying to yourself, “My downpayment isn’t a closing cost”, you’re right.

Depending on the type of loan you use, it could be the highest expense you’ll pay when buying a home which is why it’s included in this article.

Down payment amounts will depend on the type of loan you use, your financial situation, and credit score.

The lowest downpayment you could pay is NONE. The two loan products that require nothing down are VA and USDA loans.

FHA loans have a minimum down payment of 3.5%. While well-qualified buyers can use a conventional loan with zero to twenty percent down payment.

If any of this stuff sounds like a foreign language because we have another page that discusses the pros and cons to different types of loans. We also include information about down payment assistance programs.

Example Property – Down Payment

To make it easy to follow along, we’ll be using an example buyer named Brenda. She is purchasing a $500,000 townhouse in Fairfax County with a 5% down payment.

That’s a down payment of $25,000 and a loan amount of $475,000.

After every section, we’ll discuss Brenda’s property and at the end of the article, calculate how much it will cost Brenda to purchase this property.

Loan Charges

Loan Charges are fees associated with securing a loan through a lender. You can expect to pay the following four fees when using a loan to purchase a home:

Loan Origination
Underwriting
Residential Property Appraisal
Personal Credit Report

Loan charges or loan origination fees can either be paid prior to or at settlement. These are the fees charged by your lender to process your loan application.

Your lender may charge a loan origination fee, also called an underwriting fee, processing fee or administrative fee. It covers the amount charged by your lender to prepare and evaluate your mortgage loan.

For the 475,000 dollar loan the buyer may incur an underwriting fee of about 13 hundred dollars.

The loan charges also include the appraisal fee which can be anywhere from 450 to 700 dollars depending and the property size and scope of the appraisal.

Example Property – Loan Charges

The loan charges also include the appraisal fee which can be anywhere from 450 to 700 dollars depending and the property size and scope of the appraisal.

For the purpose of our example, we’ll say five hundred dollars.

Additionally, your lender would have run a credit check when you began the application process.

The credit report fee is also included in this section.

Let’s estimate a forty dollar charge for the credit report.

The last loan charge could be prepaid interest.

Depending on the time of the month you close, you may also be responsible for paying any interest between that date and the end of the month.

Impounds

At the closing, impound accounts are set up for the buyers prepaids held in escrow.

Here’s a list of prepaids held in impound accounts:

Cost of their mortgage principal
Mortgage insurance
County taxes
Homeowner’s insurance premium
Other monthly costs

Example Property – Impounds

In our example, the homeowner’s insurance collected is 60 dollars per month for the first three months of ownership.

That’s 180 dollars.

The time of year will determine how many months of property taxes you’ll pay at settlement.

For our purposes, we’ll go with four months.

The annual taxes for the 500,000 dollar home in our example is five thousand two hundred dollars.

Four months would be roughly four hundred thirty-three dollars

Title Fees

Let’s break down the Title Fees.

Title fees represent a substantial portion of this video and its good information to know when buying a home in Northern Virginia.

What does the title company do?

The Title Company acts as a middleman to transfer title, make certain all liens are released and deliver any proceeds after settlement.

To get to settlement successfully, the title company may interact with the following parties:

You the Seller, the Buyer, Your Agent, the Buyer’s Agent, Land Records, Contractors, Inspectors, Your Lender, The Buyer’s Lender, the Tax Authority, Land Records, Homeowners Association, Condominium Association, Utility Company, And, the list can go on.

With the number of parties I just listed, you can see why making sure that everyone gets paid is no easy task.

it’s imperative you pick a competent and reliable title company to handle your transaction.

You can expect to pay anywhere from $400-700 in settlement fees depending on the title company you select.

Example Property – Title Fees

For the purpose of this example, we’ll go with five hundred dollars

Title Exam

A title search is done before the closing to make sure the seller actually owns the property.

A full title search usually means searching back 40 years, but occasionally shorter or longer searches are done.

The level of the search depends on the circumstances and what the title company deems necessary.

Here are the areas the search includes:

Liens and judgments
Mortgages
Chain of Title (history of ownership)
Bankruptcies
Foreclosure
Fraud
Wills/inheritance
Property tax payments
Easement (access to property)

The cost of the title search can range from as little as one hundred dollars up to one hundred seventy-five dollars.

Example Property – Title Exam

One hundred twenty-five dollars will be used for our example.

Title Insurance

So what happens if the title company misses something during the Title Search?

There’s insurance for that.

Title insurance insures against anything missed during the title search.

There are two types of title insurance, one required when financing your home purchase and the other is optional.

The buyer pays for any title insurance.

When financing a home purchase, lenders require title insurance to cover the loan called lender’s title insurance.

The optional policy that covers the difference between the loan amount and the sales price is called Owner’s Title insurance.

Although owner’s coverage is optional, we at Ask a Walker highly recommended it for your own protection.

Example Property – Title Insurance

In our example home, the purchase price is $500,000 and the mortgage loan is $475,000.

The Lender’s title insurance would cover $475,000, and the owner’s policy would cover $500,000, the full purchase price.

Just remember the buyer pays for both the lender and owner title insurance.

Our lender insurance quote for our example is one thousand one hundred ninety six dollars and One thousand four hundred and two dollars for the owner’s coverage.

Closing Protection Letter

The Closing Protection Letter is only issued if there is a title policy in connection with the transaction.

It’s a contract between the title insurance company and your lender to minimize risk should the title company make any errors during the settlement.

Example Property – Closing Protection Letter

The fee is twenty dollars.

Title Binder Fees

A title binder is a temporary form of insurance that covers the gap between the seller and buyer homeowners’ insurance policies.

This fee can be anywhere from 75 to 125 dollars

Example Property – Title Binder Fees

We’ll go with 100 dollars for our example.

Government Recording Taxes

Neither buyer nor seller will get out of this transaction without paying the Big Fella.

The seller will pay the transfer taxes and the buyer is responsible for the recording taxes.

In Virginia, the recording taxes are called Deed & Trust taxes

Deed Taxes are 3.33 cents per $1000 of the sales price and Trust Taxes are $3.33 per $1000 of the total loan amount

Example Property – Government Recording Taxes

For our example property, with a sales price of five hundred thousand dollars, the Deed Tax will be One thousand six hundred sixty-five dollars

The loan amount is four hundred seventy five thousand so the trust tax estimate is One thousand five hundred eighty one dollars and seventy-five cents

Additionally the buyer is responsible for paying the recording fees.

Those are the deed recording and mortgage recording fees.

We’ll go with 43 dollars for the deed and 56 dollars for mortgage recording.

With the line item total being ninety nine dollars.

Prepaids

Prepaids are any charges paid prior to closing.

Typically this includes any inspections done to the property.

When you submit an offer you will have a period to allow to have the home inspected by a licensed home inspector.

Most if not all home inspectors require payment at time of service.

This charge will not appear on your closing statement but should be considered when estimating the total cost of buying a home.

The cost of the home inspection will depend on the size of the property as well as the company chosen.

You can expect to pay anywhere from four to seven hundred dollars.

Miscellaneous

Anything not covered up to this point would likely fall under the category of miscellaneous charges on the closing disclosure.

Home Inspection

Most commonly we see the wood destroying insect inspection report charged here.

The terms of the contract will determine if this is paid by the buyer or seller.

Forty-five dollars is a good estimate for this inspection.

Initiation Fees

Many homeowners associations and condo associations charge initiation fees when ownership is transferred from one owner to another.

If that’s the case you can expect those fees to fall under the miscellaneous category as well.

Each association is different and fees will vary but we’ll use an estimate of two hundred dollars for our example.

Property Survey

A survey is recommended when buying a detach or semi-detached property.

The survey documents your property line including any land and structures on the property.

It also includes things like right-of-ways and easements.

That details what to do with shared yards or driveways, or if your neighbor has a right of way to the street or alleyway between your homes.

Property surveys are not required but should you decide to have one done it will appear in this section of the closing statement.

The property survey in our example costs three hundred fifty dollars.