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You are finally ready to purchase your Delaware home and have reasonable cash prepared in the bank. But, you started to think about hidden costs or fees, and you don’t want these fees to catch you by surprise. Now, you’re wondering, “is my cash on hand enough to close a deal?” 

You came to the right place because this is usually the first thing we discuss during the initial buyer consultation. Surprisingly, many buyers often overlook one of the most crucial things in closing a deal for your home. More than the downpayment, equally important is the so-called closing cost. 

If this is the first time you have heard the term, don’t worry. This guide will tell you precisely the closing cost and why you should prepare for it. And no, it is not the same thing as your down payment. Let’s dive in. 

Closing Costs Defined

Most people think the cash needed in closing is only the down payment. After all, it’s true that down payments are paid during closing. Hence, people get confident that they can close a deal for that home as long as they have money ready for 20%, 3%, or 5% of the listing price. 

But, closing costs and down payments are not the same things. In reality, you must set aside cash for the closing cost apart from the down payment.

Simply put, Closing Costs are the fees associated with buying your home. These costs include your attorney, lender, recording, mortgage, and appraisal fees. It also consists of the Delaware transfer tax. Be mindful of it, though, as Delaware is the second highest state with the highest transfer tax.

Do You Need to Pay Both?

Yes, the buyers are responsible for paying both the down payment and the closing costs. Uninformed buyers are usually caught off guard and frustrated since they spend more than they have saved from the bank. Hence, these buyers have no choice but to settle on lower down payments to cover closing costs, leading to higher monthly premiums later. 

However, knowing the closing costs, you can prepare for it in advance. Assistance programs are available to help you cover the down payment and the closing price. 

So, How Much Cash Should You Prepare?

So, when trying to budget how much you should save from purchasing a home, always consider closing costs. Here in Loft Realty, we usually advise buyers like you to estimate probably between 3-4% of the purchase price just in closing cost. Then, prepare a minimum of 3.5%  for your down payment on top of your closing costs. This way, you will have a realistic headroom for closing costs, and they won’t surprise you when the final computation arrives. 

However, when it comes to real estate or realtor commissions, that is not paid by you as the buyer here in Delaware. That could be different in other states. So, clarify those with your realtor during the closing process. 

Final Thoughts

Closing costs are not apparent since listings only emphasize the down payment. But, knowing what these closing costs are and how they differ from down payment makes you an informed buyer. Hence, you can come up with a realistic budget on hand before you close a deal with your Delaware home. 

If you have more questions, need assistance estimating and planning your down payment and closing costs, or want to inquire about realtor commissions, we at Loft Realty are always here for you. Feel free to reach us at Hello@LoftTeamDE.com; we are always happy to help.