Lehigh Valley Homes Online - The Joe Finnerty Team Lehigh Valley PA Real Estate including Allentown, Bethlehem and Easton

Lehigh Valley Closing Costs When Buying a Home


When purchasing a home, a Lehigh Valley Home Buyer should take into account closing costs. Typically, these costs run about 5-6% of the home purchase. This is in addition to the down payment that may be required for the loan type.

For instance, an FHA mortgage requires that the home buyer put down at minimum 3.5%. Add in the closing costs and a Lehigh Valley Home Buyer will need 8.5% to 9.5% of the purchase price to buy the home. The closing costs can be built into the mortgage using sellers assist but for now lets take a look at what are the Closing Costs when purchasing a home.

Out of all the costs associated with closing on a home, there are 3 that are "big" items:
 

  • Title Insurance - based on the purchase price
  • 1% Transfer tax - based on the purchase price
  • Real Estate Taxes (municipal, county, school) - Tax Prorations (taxes seller prepaid) and Mortgage Tax Escrow (how future taxes get paid)


The Real Estate Taxes can be the most expensive. Lehigh Valley Closing Costs typically include a year to 13 months worth of taxes. Let's take a closer look.


Lehigh Valley Home Seller Tax Prorations - Taxes Home Buyer Owes the Seller

When you purchase a home, the seller should have pre-paid the taxes for the following year. The home buyer will owe the seller back for any taxes that will become their responsibility on Closing Day. The home buyer pays the seller back at prorated amount.

Lehigh Valley Home Seller Tax Prorations

In this example, the Home Buyer will close on March 31st, so they must pay back the seller for taxes that the seller prepaid (3 months of school taxes and 9 months of Municipal and County taxes).
 

Lehigh Valley Home Buyer Mortgage Tax Escrow - Mortgage Company will collect money for Future Taxes

Lehigh Valley Home Buyer Tax Escrow

The Home Buyer will close on March 31st, so their first mortgage payment will be May 1st. Each mortgage payment will include 1/12 of the taxes for the year.

Therefore, when the school taxes come due at the end of June the mortgage company will only have 2 months of payment towards the taxes.

As a result, at the closing the mortgage company will collect money to put a starting balance in the escrow account. That way in June when the school taxes have to be paid the money will be there.

When you add together the Seller Paid Tax Prorations and the Buyer Mortgage Escrow, it is equivalent to approximately 12-13 months of the yearly taxes on the home.


Closing Cost Example

Here is an example of the closing costs for a home purchased at $150,000 with yearly taxes of $2,800.00.
 

Purchase Price $150,000 Yearly Real Estate Taxes $2,800
Title Search/Insurance $1,265.00 Enhanced Coverage - Based on purchase price
Closing Protection Letter $75.00 Required by lender
Title Endorsements $200.00 Required by lender - 4 @ ~ $50.00 each
Settlement Notary Fees $45.00 7-9 notaries @ $5.00 each
Transfer Tax $1,500.00 1% of purchase price
eDocs, flood cert, and Misc $200.00 Miscellaneous Fees
1 Year Hazard Insurance $600.00 Depends on deductible, coverage...etc
1 Year Taxes $2,800.00 Municipal + County + School (changes with each property)
Inspections $400.00 Can be $400 - $700 depending on required inspections
Appraisal $450.00 Varies with each lender
Mortgage Application Fee $400.00 Varies with each lender
Total Closing Costs $8,335.00  

The closing costs are in addition to whatever down payment is required based on the mortgage type. For instance, FHA requires 3.5% down. In the above example, the FHA down payment would be $5,250.00 bringing the total costs to purchase the home to $13,585.00.

Note: Sellers assist can be used in many situations to offset the amount of the closing costs money the buyer will need in order to purchase the home. 

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Direct: 484-241-1641
Email:
joe.finnerty@foxroach.com

The Joe Finnerty Team
Direct: 484-241-1641

Berkshire Hathaway Home Services
Fox & Roach, REALTORS®
3101 Emrick Blvd, Suite 101
Bethlehem, PA 18020
Front Desk: 610-865-0033
FAX: 610-974-9430

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If you are planning to buy or sell a home, Lehigh Valley Homes Online has the complete MLS listings for Allentown Real Estate, Bethlehem Real Estate, and Easton Real Estate. There is information about every municipality in Lehigh County and Northampton County. All real estate sales are included. Lehigh Valley Property listings include houses for sale, condos, new homes, and over 55 plus communitities. Information on this site is provided for Lehigh Valley Home Buyers and Lehigh Valley Home Sellers.

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