Congratulations! 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.