Buying a home brings forward a ton of different emotions. Excitement, anxiety, disappointment, and celebration are all normal parts of the home buying process. And just when you think the work is done, you'll confront closing costs on your new home.
Let's face it - coming up with thousands of dollars of additional expenses beyond what you're paying for your new home is not fun. Luckily, I've got you covered.
Today, I'm here to help Ohio home buyers cut their closing costs by up to 30%.
Table of Contents
What are closing costs anyway?
Your closing costs are a list of fees and expenses that you'll pay for when you take ownership of your new home.
These fees will be assessed by a number of involved parties, such as your lender, title company, real estate attorney, and others.
For buyers in Ohio and around the country, this means a laundry list of fees that you'll incur as a result of buying your home. Of course, some expenses are higher than others, and you'll likely encounter everything from a $20 courier fee to a multi-thousand-dollar mortgage loan origination fee.
Related: Our first-time home buyer guide
How much are closing costs in Ohio?
On average, home buyers in Ohio can expect their closing costs to be approximately 2-3% of the purchase price of their home. This means that the average $300,000 home will likely carry closing costs of between $6,000 and $9,000.
Because some costs carry relatively fixed expenses, like your appraisal for example, those that buy less expensive homes will likely pay over 2% of the home's purchase price.
With an average home price of $205,553 statewide, this means that you can expect to pay somewhere in the vicinity of $4,100 in buyer costs.
Of course, those buying in high tax areas can expect to pay more, while those purchasing a home in lower taxed rural areas of Ohio can expect to pay a little less. Regardless, it is really important that you include closing costs when you budget for your home.
What expenses make up closing costs?
At your closing, you'll usually provide a check (or wire money) to cover a bunch of different fees accrued during the home buying process. Most of these expenses fit into a few different categories:
Title fees - may be bucketed as attorney fees
Lender fees - fees related to your mortgage loan process
Down payment - the money you are putting down on your new home
Property related fees - fees related to appraisals and other fees
Let's explore these categories one by one.
1. Title fees
When you close on your home, you'll need to pay your attorney/title company for the services performed to get your home's title and legal documents squared away. Included in these title fees are expenses such as:
Title search fees
Title insurance
Notary fees
Recording fees at your local town/city hall
Most of these fees are fairly reasonable, and you can expect to pay somewhere in the vicinity of $1,000, excluding the title insurance, which is usually mandated by lenders nationwide. The title insurance could cost you around $1,000, but there are no ongoing premiums.
2. Lender fees
Closing is typically the point in time in which you'll pay all of your lender fees as well. Lender fees traditionally include:
Mortgage application fees
Underwriting fees
Document preparation
Credit reporting fees
Prepaid mortgage interest
Mortgage discount points (used to lower your interest rate)
Costs of these things can vary greatly by lender, area, and when you're closing. Generally, you can expect to pay a few hundred dollars for each the application and underwriting fees. Credit reporting fees should run you less than $75.
The two largest variables in this category are your prepaid interest and mortgage points. If you didn't pay mortgage points on your loan, then this expense is zero. Your prepaid mortgage interest, on the other hand, depends on the date that you are closing. Typically, when you close on a home, you'll need to pay the mortgage interest for the remainder of the month.
So, if you close near the end of the month, you may only owe a day or two of interest, which will keep your costs lower, especially as compared to closings during the first week of a new month.
Also, keep in mind that you'll need to pay private mortgage insurance each month that you have less than 20% equity in your home. These can be looked at as an additional type of lender fee. PMI can be avoided in its entirety with a 20% down payment.
3. Your down payment
Though not technically a part of "closing costs" per se, your down payment will be included in the check that you bring to your meeting.
Now, the amount of your down payment is dependent on many different variables, including the price of your home and the type of mortgage loan you applied for. But as a rough estimate, your down payment will almost certainly be between 3.5% (minimum for FHA loans) and 20% of the home's purchase price.
For a $250,000 home, this means that your down payment will be between $8,750 and $50,000.
4. Property related fees
The last major category of fees that you'll need to prepare for are those that actually have to do with your new property. And while some of these expenses may be paid for in advance of your actual closing, we're talking about things like:
Your home appraisal
Fees for home/water/radon inspections (if applicable)
Survey fees (if applicable)
Flood certification (if applicable)
Homeowner's insurance
Property taxes
These items, excluding homeowner's insurance, combined shouldn't cost much more than $1,000, but keep in mind that there are also miscellaneous expenses that may arise.
How to lower your closing costs by 30%
I told you that I could save you 20% off your Ohio closing costs. If that sounds good to know, here is the blueprint:
Shop around for homeowner's insurance
Close late in the month
Shop lenders
Finance your closing costs
Buy in a low property tax county
Save on home insurance | |
 | SuperMoney is a comparison-shopping site that will help you pick the right home insurance policy for your new home! |
1. Shop around for homeowner's insurance
Potential Savings: $500 per year
I highly recommend that you shop around for homeowner's insurance policies rather than just accepting the first quote that you receive.
When my wife and I bought our home last year, we were able to find more coverage for about $500 less per year. You never know which insurers want to build books of businesses in certain geographic areas, which can lead to favorable premiums for homeowners.
I recommend that you start with SuperMoney. They're a comparison shopping site that helps you to find a list of home insurance companies in your area along with customer reviews and contact information for quoting!
2. Close near the end of the month
Potential Savings: $1,000+
Remember how we talked about prepaid interest due at closing? It is the only time that you'll prepay mortgage interest, for the remainder of the month in which your closing occurs.
So, if you close at the beginning of the month, it is like prepaying your first mortgage payment's interest component before actually making a payment.
If you close on the 30th day of a month, on the other hand. you'll only owe a day or two of interest expenses. It's worth the potential hassle in scheduling, since most every lender and buyer is aware of this "loophole."
It can easily save you $1,000 or more.
3. Shop lenders
Potential Savings: Varies
Another way in which Ohio homebuyers can save money on their closing is to shop around when picking a mortgage lender. This may sound basic on the surface, but you have more to gain than just finding a lower interest rate.
You'll find that different lenders also assess different fees come closing time. Consider the dreaded loan origination fee, which normally costs between 0.5-1% of your home's purchase price.
If you find a lender that charges on the lower end of the spectrum, you could save yourself another $1,000 - or more!
4. Finance your closing costs
Potential Savings: Varies
Did you know that you may be able to roll your closing costs into your home financing? Similar to financing sales tax when you buy a new car, some lenders will loan you money to cover your closing costs.
This is a lender-by-lender decision and may or may not be an option to you, depending on the type of home loan you're taking.
5. Buy in a low tax county
Potential Savings: $1,000 per year or more
Ohio's property taxes are the 13th highest in the United States, according to SmartAsset. But rates are drastically different in different areas across the state. Consider the following counties with the five highest and five lowest effective rates:
Highest:
Cuyahoga - 2.44%
Montgomery - 2.18%
Franklin - 2.05%
Lucas - 2.02%
Greene - 1.90%
Lowest:
Lawrence - 0.87%
Monroe - 0.89%
Wyandot - 0.90%
Pike - 0.93%
Harrison - 0.95%
Using these rates, a $300,000 home has property taxes of around $7,320 in Cuyahoga County, but just $2,610 in Lawrence County. So, if you're expected to pay 3 months of property taxes at the time of closing, the house in Cuyahoga County will add nearly $1,200 additional to your closing costs.
Of course, you'll want to take into account other factors, such as the quality of public schools, for example, but if you don't have children, buying in a lower tax county may be more feasible.
Download our Ohio closing cost calculator
For the first time in years, we are in a high interest rate environment. These higher rates in turn will impact your borrowing costs as you search for your dream home in Ohio. To help you stay on track, we've built a closing cost calculator.
This completely free tool will provide you with a workbook to gauge and estimate your closing costs all in one place, as well as help you to keep track of all the services that you'll need completed prior to close.
Tips to save for your closing costs in OH
It is really important to begin preparing for this list of expenses prior to purchasing your home. We've got some experience in helping prospective Ohioan home buyers to save for their closing.
Over the past couple of years, we've come up with the following list of tips and tricks:
Open up a separate savings or checking account: Having a separate account to help you prepare for your closing costs will help you more easily keep track of the progress that you've made in saving.
Temporarily adjust your budget: Cutting discretionary is never fun, but doing so for even just a month or two can help you avoid touching more of your savings once you get the clear to close on your new home. In turn, you'll then be able to do things like make cosmetic updates or any updating that you want to do more quickly.
Closing cost guides in nearby states
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