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Closing Costs for a New Home – Here is Your Arm and Leg…

Since the new closing date of October 4, 2012 seems to be an actual, realistic day, I’ve been going over all our numbers to make sure we are really on target for the move.  I’ll take some more pictures to post for you on Thursday as they finish up all of the big stuff (yay!!!), but in the meantime, here is where we are standing before closing on our new home:

New Home Numbers

Closing is going to be expensive.  The builder offered us 3% of the final home price to put towards closing costs or the price of the house as we saw fit, so we took 1% off the total price of the home and sent 2% to the closing costs to help us out a bit.  So the final price of our new home will be about $260,000.  Our loan amount will be about $208,000.  Here are how the closing costs are breaking down:

  • 20% down payment – $52,000
  • Loan Fees from the Lender – $2180
  • Loan Fees from the Title Company and Builder ($410 might be waived) – $3830
  • Prepaid October Interest – $635
  • Homeowner’s Insurance for one year – $1122
  • Property Taxes for the rest of 2012 (worst case scenario if they have it on file as improved land) – $2100
  • Credit from Builder for Closing Costs – $5200
  • Credit from Lender for Title – $1700
  • Return of Earnest Money – $2750
  • Return of Items already paid for like the Appraiser and Credit Reports – $485
  • Total Money Needed at Closing – $51,732 (best case $50,000 depending on property taxes and waived fees)

Our Reaction

We sort of expected this to be a tiny bit worse.  I’m actually happy that our closing date has been pushed back 5 times and we didn’t close August 28, 2012 as originally planned.  This extra month has given us time to really pad ourselves.  The closing day will still hurt like a b*tch, but we’ll still have breathing room that makes us happy.  :-)

Where the Money is Coming From

Our cash is currently spread out between lots of sub-accounts and cash on hand that we’ve built up since April.  The closing costs are zeroing out a few of our supplies:

  • Checking (not touching it, so there is a paycheck of padding there)
  • Emergency Fund (only using a few thousand, so we’ll still have a couple of paychecks of padding here)
  • Taxes (not touching them of course)
  • Home and Auto (using it all)
  • Investments (using it all)
  • Vacation (using it all)
  • Fun Money for Hubby (using it all)
  • Fun Money for Me (using it all)
  • Self-Employment Income Padding (not touching it so it will also have 3-4 paychecks of padding as usual)
  • Cash on Hand (using a lot of it for moving costs like the actual movers, backyard sodding, blinds, etc)
  • Paypal (not touching it and there is a paycheck of padding there too)

What Will be Left

After closing and moving, we will want to start rebuilding our reserves.  Even if we completely stop making income of any sort and refuse to cut any expenses at all (including the new ones), we’ll still have about 3-4 months of total padding in straight savings, so yay!  That would give us enough time to at least sell the huge house at a loss.  We will also have about 3 months of straight-up expenses in our stock investments.  And another 8 months in retirement accounts.  If we decided to keep the huge house, we could technically sell our current one for another 18 months of income.  But the plan is NOT to stop making money of any sort…I just like worst case scenarios that still don’t completely suck…

If we just continue bringing in what we have been in the slower months of this year, we can cover all of our bills and fully fund our Roth IRA’s.  If we have a low 6 months and the average of the last year over the other 6 months, we’ll also be able to pad our savings, make a few investments, payoff the current mortgage next year as planned, and even start having pure fun money again.

Overall, we are in a good spot.  The rental income from our current house and from our roommates already covers 25-35% of our total expenses (which include taxes).  So we even have that padding in case the worst month of income ever decides to pop up.  I’ll also have a way better idea of what is “normal” for us over the next 6 months.  I really can’t wait to have a little more experience under our belts so everything isn’t a constant surprise, lol.

What are you thinking?  Were your closing costs through the roof?  Are you saving for a new house right now?  What sort of padding do you like to have on hand?

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27 comments to Closing Costs for a New Home – Here is Your Arm and Leg…

  • Your closing costs are less than your down payment, that’s awesome. We don’t get all those credits here so good for you.

    We’re saving for another property right now. We’ll still have our emergency fund and our retirement savings after we purchase. I am saving my old mortgage payment and hubby has matched that, so we’re saving $4000 a month for our next purchase.

  • I feel your pain. It is really, really hard to hand over a check for that much, even if you get a great house in return. I think you’re doing great. Good luck with the move.

  • We bought a much smaller house but closing costs are rarely ever cheap. At least you have planned for the worst but you shouldn’t hope for the best. I am sure your business will continue along just fine!

  • It’s getting close! I am so excited for you!!!
    I am confused… you say you are using all your investments to pay for closing/down payment? So you mean you are selling all you have in investments, or are you just using all the income that comes in from those investments? If you are really talking about selling all your investments I hope you will reconsider. You will be missing out on easy income (with dividends and capital gains) while you are rebuilding those accounts. Meanwhile, if you took money out of your cash accounts, like checking, you would still have your investments and if you came into a dire financial emergency (which I don’t see happening) you could still sell the investments.

  • When closing for our house in 2007, the lender did a bundled closing cost which included everything. The title company sent over the paperwork with the estimates and had that amount plus everything broken out as well. I kind of used that as my number. So, then when the final paperwork came back and all the line items except the ‘one cost’ line were in place, it was like ‘Wow, those just came in $3k less’.

    I don’t think they do it that way anymore because now they have to be a lot more detailed as part of the reforms from the crash.

  • I was kind of shocked at closing costs when we bought our first house. Right now we are in saving mode to buy our next home since we lost most of the equity in our first. I will be more aware at the total expense this time around.

  • @Call Me, we don’t usually get 3% credits here either, but this was the deal they agreed on in April when they were having problems selling their last 4 lots… :-) Congrats on your $4k a month to an investment property!!!

    @Kim, thanks!

    @Lance, fingers crossed!

    @Denise, no, no, lol. We are using some of our ING savings accounts (those are the ones I listed) to pay for the closing costs. We won’t touch our stocks, Roth IRA’s, or any other investments unless the worst happens and we stop making money completely. That was just a worst case scenario paragraph. What is realistic is that we close, have about $15k-$20k left in cash, and slowly start rebuilding our cash accounts. No investments touched. We just won’t be adding to the investment accounts much for the rest of this year. :-)

    @Money Beagle, yeah…they are much more precise now since they want there to be no surprises on October 4…

    @Sean, good luck!

  • Glad you are so close to closing. My closing costs were about $3K (not including my 20% down) which seems to be on par with your closing costs.

  • I had the same question as Denise but I know you are too smart to sell investments :) Overall closing costs less than the downpayment seems to be a great deal. For the house this size, you will be handing over 200k in CA :) I should start educating myself on buying a house if/when we move (CA is totally out of the question). How did you prepare yourself before you bought your first house?

    Good luck on the closing! Send lot of pictures of the finished house! It is coming out to be an awesome house!!!

  • You are a great role model Crystal – you should be proud. You have both been very sensible with your cash and created a large safety net. Can’t wait to see more pictures! :)

  • Angella

    My house was only $35k, but my closing costs were just over $5k not including down payment! I was blown away by that. They changed it on me about 6 times too. Never fun. I love that you plan for the worst case scenarios! So many people get in over their head with no back up plans. As stated above, you are a great role model!

  • How much are the loan origination fees? Looks like the builder credit is going to help a lot! Congrats for being in the “home” stretch! :-)

  • @Jenna, nice! $3k after any credits or total? Ours are coming to more than $9000 if we weren’t receiving that 2% help. I think it is ridiculous…

    @Suba, correct – we are not selling any of our investments unless we simply need the money while we look for new day jobs. Before we bought our first house, I asked around for personal stories a lot and researched general costs online. I will totally get another picture post up this Thursday since everything is pretty much being finished by Wednesday afternoon!

    @Savvy Scot, awww, thank you!

    @Angella, wow, yay for an affordable house! And thanks!

    @Wendy, they waived the loan origination fee itself but charged us for lots of little other stuff…I think it was waived in name only. Hehehe, nice pun. :-)

  • Closing costs are getting really expensive (it depends on the lender). You did a great job of saving enough money to pad your expenses during those low-income months. If ever I would be buying a new house, I would do the same thing you did and save enough money to pad my savings. Savings = Safety :-)

  • Stephania

    Hey there! I’ve been following your website for a while now and finally got the courage to go ahead and give you a shout out from Porter Texas! Just wanted to tell you keep up the good work!

  • I know this if off topic but I’m looking into starting my own weblog and was curious what all is needed to get set up? I’m assuming having a blog like yours would cost a
    pretty penny? I’m not very internet savvy so I’m not 100% sure.
    Any suggestions or advice would be greatly appreciated.
    Thank you

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