How much can you expect to pay for closing costs in Philadelphia and the suburbs? If you’re buying or selling a home closing costs will be part of your costs. In addition to closing costs that are paid at settlement, the day you buy or sell your home, be prepared for additional prepaid costs such as fees for home inspections and municipal inspections.
In this article we’ll go through the typical closing costs in Philadelphia and the suburbs for both home buyers and sellers. We’ll cover what the closing costs are and help you narrow down how much to budget for your closing costs.
What Are Closing Costs?
Closing costs are fees paid at settlement when you buy or sell a home. For home buyers these fees include mortgage lender fees, title fees, insurance, and taxes. For sellers the majority of the typical closing costs are real estate broker commissions, transfer tax, and mortgage balance payoffs.
Settlement Day will be the day that you take ownership of your home. This is when you’ll pay your closing costs. In addition, there are a few typical prepaid costs that you should expect when buying a home.
The common closing costs to expect when buying a home in Philadelphia and the suburbs are:
- Down Payment
- Mortgage Fees
- Title Fees
- Broker Fees
- Fees Prior to Settlement
- Home Inspection Costs
- Appraisal Fees
- Attorney Fees
All of these costs typically add up to 5-8% of the purchase price plus the cost of your down payment. Your down payment can range from 0% to over 25% of the purchase price but 5-20% is most common. Below is a detailed explanation of the typical closing costs so you know what to expect when buying a home in Philadelphia.
Down payments vary by the type of mortgage loan and the property. The down payment can range from 0% for a VA loan to 25%+ for jumbo loans. The most common down payment amounts are 3.5% for FHA loans and 5%, 10%, or 2o% for conventional loans. Mortgages that with less than a 20% down payment will typically require an additional monthly fee for mortgage insurance.
These fees include origination and processing costs. Mortgage Fees will typically cost about $2,000 to $4,000 depending on the cost of the home. Fees are regulated and tend not to vary much from one lender to the next but it’s important to shop around just in case.
The lender will also hold several months worth of mortgage payments in an escrow account. This escrow money will be collected at settlement.
Buyers work with a title company who will research the legal ownership of the property to make sure that it can be sold without unknown encumbrances that may impact. The title company will provide insurance to cover mistakes and omissions. The title company will also include fees for processing the transfer of the property. These fees typically cost about $2500- $5,000 depending on the price of the home.
Your lender will require that you carry a homeowners insurance policy. Policies and costs vary but you can estimate anywhere from $1500 – $3,000 as an initial guide.
The lender will also hold several months worth of insurance payments in an escrow account. This escrow money will be collected at settlement.
Closing costs in Philadelphia will include both transfer taxes and property taxes. Transfer tax is 4.28% of the purchase price in Philadelphia and 2% in the suburbs. This is usually split evenly between the buyer and the seller. The title company will collect property and school taxes for the part of the year that you’ll own the property. You can find the annual tax for a property in the public records and on property listing.
Your lender will also hold several months worth of tax payments in an escrow account.
The majority of real estate broker fees are typically paid by the seller. However, it’s fairly common to have a nominal commission ranging from $350-$550 paid by the buyer at settlement. This commission is typically used to pay office processing fees for your transaction.
Most home sales in the area include a home inspection, radon inspection, and termite inspection. The cost for these will typically run about $650-$800. Additional inspections and follow up inspections may be necessary, as well. Home inspection costs are paid at the time of service rather than at closing.
Your lender will require an appraisal to get an independent opinion of the value of the home. Appraisal costs are typically charged when they are ordered. The appraisal is usually ordered soon after going under contract. Appraisals will typically cost $400-$800 depending on the type and size of the home.
Most home sales in Philadelphia won’t involve an attorney but you may want to have an attorney review contracts or write up specific language. More common is having an attorney review and explain condo and homeowner’s association documents, when applicable. Estimate in the $250-$500 range for document review.
The majority of costs when selling a home in Philadelphia and the suburbs are real estate broker commissions and transfer taxes. Other common costs paid before settlement include home staging, pre-listing repairs, municipal certifications and municipality required repairs, possible post-inspection repairs, costs for moving and storage, and mortgage payoff balances.
The transfer tax in Philadelphia is 4.28% of the sale price. In the suburbs it’s 2% of the sales price. This is typically split evenly between the buyer and seller.
Commissions are paid to your agent’s broker and split between your broker and the buyer’s broker. Commissions vary but you can budget for 6% as you begin your home sale process as that number is common in the region.