How Much Should You Budget for Condo Closing Costs?

Nest eggCongratulations!  You’ve saved diligently and your dream condo down payment is within sight.  You are all set to start looking for a place when you visit your friendly neighborhood mortgage loan officer and find out that you need to save a little bit longer, to cover your condo’s closing costs.  There costs vary by location, but can easily add 2%, and even as much as 5%, to your condo purchase budget.

So, what are these costs and how much should you plan to spend?  Let’s sort them out. Here’s a list of typical fees you’ll encounter when buying a $400,000 New York City condo.  (The fees in most other areas will usually be somewhat lower.)

Your attorney’s fee $1,500
–          This attorney, an important hire, is in your corner throughout the purchase process.

Mortgage application fee $500
–          Fee to the bank that gives you a mortgage,  to cover their initial expenses.

Appraisal fee $300
–          Payment to cover the cost of an independent appraisal of the condo for the bank.

Mortgage tax $750
–          Taxes paid various government entities to record the loan transaction. Seven states impose these taxes.

Mortgage title insurance $500
–          Protects the mortgage lender against problems with the title to the unit, for example, if it turns out the seller did not have the right to sell.

Fee title insurance $1,500
–          Protects you against problems with the title to your unit.

Municipal search $350
–          Verifies that the Certificate of Occupancy, necessary Building Permits and other documents are in order for the condo building and your unit.

Various recording fees $500
–          Cost to record your purchase in various public records.

Bank attorney’s fee $500
–          Yes, you’ll have to pay for the bank’s closing lawyer, too!

Condo association fee adjustment $250 (est. ½ month)
–          To adjust for association dues paid by the seller related to post-closing time period.

Real estate tax adjustment $1,000 (est. 3 months)
–          To pay the seller for real property taxes paid related to post-closing time period.

Real estate tax escrow $1,000 (est. 3 months)
–          Bank may require you to establish an escrow (sort of a savings account) for future property tax payments.

Move-in deposit $500
–          The condo’s association may require you to give a deposit to compensate the building for any damages your move-in may cause, for example, damage to hall wallpaper.

These estimated closing costs total $9,150, or about 2.3% of the purchase price.  Your actual closing costs may be more or less, but using a 2-2.5% of purchase price as a starting point, gives you a rough ballpark of the extra amount you need to save for your condo.  With the $400,000 purchase price in our estimate, if you were planning to put down 10%, or $40,000, you’ll need to actually save about $50,000 in order to have enough to close the deal.

Closing costs on the purchase of a co-op are typically much lower. We’ll estimate those in an upcoming post.

Note: If your condo costs more than $1 million, add another 1% of the sales price to the closing costs, for the so called NYC mansion tax.

Author My First Apartment
Seija Goldstein

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Seija Goldstein is My First Condo's General Manager and occasional blogger. She is a business consultant to media companies, and a long-time shareholder in a large New York City co-op. She has survived both kitchen and hallway renovations and is about to redo couple of bathrooms.

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