Over the past few years, buying a home has gotten more difficult. With interest rates higher than they have been in some twenty years, the market may remain difficult for the foreseeable future.
Still, millions of Americans are saving to purchase their own homes. But beyond high rates, prices, and supply/demand imbalances, student loan debt, consumer debt, and other financial obstacles stand in the way for so many.
Regardless, you'll one day be ready to join the ranks of homeowners nationwide! But before this, there is one more obstacle to overcome: affording your closing costs.
Here is what you need to know about closing costs in Wisconsin.
What are closing costs?
In The Badger State, and all across the United States, you will need to pay the parties involved that helped you gain ownership of your home.
Closing costs are the associated fees and expenses incurred as a result of buying a new home. Oftentimes, ten or more different expenses make up your closing costs. Your costs may include some or all of some of the following expenses:
Title insurance
Title search
Mortgage application
Mortgage underwriting
Home appraisal
Funding an escrow account
You may also have realtor fees and commissions that youWe'll cover all of your closing expenses one by one in a moment.
Home prices in Wisconsin
As is the case in most areas of the country, home prices in Wisconsin have gotten more expensive. According to Zillow, the average home in The Badger State is worth about $279,000 as of January 2024. This represents an increase of over 6.5% in the past 12 months.
While WI is still cheaper than the average home nationwide, the fact that the state has gotten more expensive is hard to ignore.
How much are Wisconsin closing costs?
Under normal conditions, the average Wisconsin buyer can expect to pay 2-3% of their new home's final sale price in total closing expenses.
This is an estimate, and your actual costs can vary depending on a number of different variables. On average, though, Wisconsin homes near the median sales price will average between $5,580 and $8,370 in closing costs.
Of course, those that buy more expensive homes can expect to pay a little more, while those that buy cheaper homes can expect to pay somewhat less.
Since many of the closing cost elements do not depend on the purchase price of your home, though, they may not decrease by as much as you may expect.
A list of closing costs
Here is a sampling of some of the closing costs you can expect to encounter after you agree to a final sales price and get your home loan squared away.
1. Loan origination fee
Your lender most likely will assess a loan origination fee for issuing you the financing necessary to buy your new home. Typically, this fee is between 0.5% and 1%, though you can occasionally find lenders offering some sort of promotion.
2. Application and underwriting expenses
Did you think your bank would let you off with just the loan origination fee? Wrong (unfortunately). Most lenders will also assess charges for reviewing your mortgage application and underwriting your loan.
The good news is that this is unlikely to cost you more than a few hundred dollars, except in select circumstances where your loan situation is complicated.
3. Title search and insurance
You'll also need a real estate attorney or title company to perform a title search to ensure there won't be any long-term legal problems or contests to your ownership of the home. This will oftentimes include a detailed search of town/county records to search for liens, undisclosed owners, and other potential red flags.
Unfortunately, mistakes do happen, so lenders will require you to purchase title insurance to protect yourself (and the bank by association) in case an issue arises in the future.
Your title insurance is a one-time fee that covers you for as long as you're in the home, with no ongoing premiums. It will likely cost a few hundred dollars.
4. Funding an escrow account
We've touched upon this already, but you'll also need to fund an escrow account. Escrow accounts are special savings accounts that your lender will hold in your name to pay your real estate taxes, homeowner's insurance, and maybe other expenses.
This will be one of your larger expenses, after your loan origination fee, since it will include some months of property taxes, as well as one year of prepaid homeowner's insurance.
Features such as backyard swimming pools and trampolines are likely to impact your insurance premiums.
5. Home appraisal
Prior to your close, your lender will mandate that your new home undergoes a home appraisal. The bank will send out a property appraiser, at your expense, to ensure that your home, and the piece of property it is on, is worth more than the amount you are financing.
This protects the bank's interests, since they don't want to loan you money to buy something that isn't worth what you're paying. The average appraisal costs around $500.
6. Other miscellaneous fees
Of course, there will also be incidental expenses that pop up, but they shouldn't be anywhere near as expensive as the fees that we've already covered.
Examples include credit reporting fees, courier fees, and other incidentals that should not run you more than a few hundred dollars in total.
Buying a home in Wisconsin
As I mentioned, when you buy a new home, you're going to incur closing costs of many types. But did you know that some of your expenses will be dependent on the location of your new home?
That's right, and no geographic variable will impact your closing costs quite like your property taxes will.
Wisconsin property taxes by county
Average property taxes across The Badger State vary by county, just like they do in every other state. According to SmartAsset, Wisconsin actually has the eighth highest property taxes in the entire country. But the following counties have the state's highest average effective tax rates:
Menominee - 3.19%
Milwaukee - 2.53%
Kenosha - 2.20%
Racine - 2.11%
Rock - 2.11%
On the contrary, these counties have the lowest tax rates.
Vilas - 0.94%
Sawyer - 1.03%
Burnett - 1.20%
Oneida - 1.21%
Door - 1.27%
This is a huge difference, and this difference will carry over to your ultimate closing costs. A $300,000 home in Menominee County will carry annual taxes in the vicinity of $9,570, while a similarly priced home in Vilas County will only carry an annual tax burden of around $2,820.
Given that you oftentimes need to pay three months - or more - of property taxes at closing, the county in which you buy your home could impact your closing costs by well over $1,000!
Who pays closing costs in WI?
Both buyers and sellers have their own set of closing costs that they are generally responsible for. In Wisconsin, this holds true, though each party typically pays for different expenses.
Buyers will face lender, title, and escrow fees, while sellers will encounter their own title fees, as well as deed transfer taxes and recording fees.
What factors influence your closing costs?
Ultimately, there are a few main factors that play an outsized role in determining how pricey your closing costs will be. These variables are:
Your closing date within a calendar month
The purchase price of your home
The local property taxes in your new community
1. Your closing date within a calendar month
Most people don't realize that your physical closing date has a role in determining what you'll owe. This is because the month in which you take ownership of your new home is the only time that you'll ever prepay mortgage interest.
So, if you close on the first day of a month, you'll owe an entire month of interest, but if you close on the last day of a month, you'll only be responsible to pay a day or two of interest.
Because of the way that mortgages amortize, your first months of mortgage payments are largely interest based payments, so this strategy could save you more than $1,000 on a typical $300,000 mortgage.
2. The purchase price of your home
Another expense determinant is the purchase price of your home, and more specifically the amount that you finance. Here's why: most lenders out there will assess a loan origination fee equal to 0.5-1% of your loan amount.
Generally speaking, the more house you buy, the more you'll finance. So if you take out a $400,000 home loan, you could be looking at $2,000-$4,000 in loan origination fees.
3. The property taxes in your county/town
The last large variable to consider is your projected property taxes. Depending on the date on which you close, you'll likely need to pay at least a couple of months of property taxes in order to establish your escrow account. When my wife and I bought our home in 2022, we needed to come up with three months of property taxes at the closING.
Wisconsin closing cost assistance
Thankfully for buyers across Wisconsin, there are some organizations and programs that offer down payment and closing cost assistance. Among these programs are:
The Milwaukee Home Down Payment Program
The PATH Program
Chase Homebuyer Grant
NeighborWorks Green Bay
These programs are well worth your time to explore eligibility requirements and other qualifying criteria.
Lower your Wisconsin closing costs
We get asked all the time if we have any strategies to help keep your closing expenses as low as possible. And while there is no magical secret that will help you to pay 50% less, there are a number of strategies that you can employ. Some of them we've already begun to discuss, such as closing late in the month and shopping in a low-tax community.
But one of the best other pieces of advice that we can give is to choose your mortgage lender and title company wisely. With some advance planning, you may be able to find a lender offering a reduced or even zero loan origination fee, a closing cost that is normally equal to 0.5%-1% of your loan amount. In our experience, we have encountered a number of different lenders offering low or even zero loan origination fees.
Among the lenders to consider in Wisconsin to keep your closing costs low include:
Ally Bank
Pentagon Federal Credit Union
Navy Federal Credit Union
And while you will want to do your own research on lenders, shopping for title services may save you further dollars.
We help borrowers in Wisconsin and across the country to find the right mortgage lender.
Tips to lower your Wisconsin closing costs
We oftentimes hear from prospective home buyers across Wisconsin and the rest of the country wondering how to keep their closing costs as low as possible. Over the past couple of years, we've been taking notes and have put together the following list of tips and tricks to keep your expenses as low as possible:
Research closing cost grants: Oftentimes, states, towns, and private organizations fund their own closing cost assistance and grant programs. In Wisconsin, programs like those that we mentioned before can really help you make a dent in what you owe.
Buy in a low tax area: Remember - you will owe a number of months of property taxes due at closing in order to establish your escrow account. As one of the largest components of your closing costs, buying a home in a lower-tax area may save you hundreds or even thousands of dollars come closing time.
Closing costs in nearby states
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