What You Need To Know About Closing Costs In DC
Buying
As a first-time buyer, you’re probably already well aware of the deal with down payments (or at the very least, that they exist). But what many prospective buyers don’t know is that closing costs — an expense entirely separate from the down payment — can be just as daunting…that is, if you don’t know how to navigate them.
So, without further ado, keep reading for everything you should know about closing costs in DC today!
First Things First…What Exactly Are Closing Costs?
The additional expenses that come along with buying a home. Appraisal fees, credit reports, and loan origination fees can all be included. Closing costs typically need to be paid upfront for services rendered.
Unlike the down payment, they can’t be rolled into the cost of the loan if buyers run out of cash — so buyers need to make sure they estimate high.
Because certain closing costs are variable, it can be difficult to estimate what they’ll entail before buyers have a specific property in mind. Prorated taxes paid out to the seller, for example, can vary by hundreds of dollars depending on which county the home is located in.
DC is also unique due to its close proximity to Maryland and Virginia. Homebuyers who have experience purchasing homes in those states should be aware that the costs and fees will differ.
Who Pays for Closing Costs in DC?
Both the buyer and the seller pay for closing costs in Washington, DC. Each party is responsible for different fees (though depending on market conditions, one party may offer to pay certain fees for the other).
You may already know, for example, that the seller pays for both the listing agent’s commission as well as the buyer agent’s commission; these are part of the seller’s closing costs. The buyer, on the other hand, is responsible for paying for their credit report, which is included in their closing costs.
➤ Thinking about buying a home? Read these other blog resources to help you get started:
- The Key to Successfully Buying Your First Home With No Down Payment
- Everything to Know About Mortgages Today
- Why You Should Buy Your Next Home, Not Rent It
- What to Know Before Buying a Home in DC
What are the Typical Closing Costs In DC?
Typical homebuyers in Washington, DC pay 3-5% of the home’s sale price in closing costs. For a $700,000 home, that’s about $21,000 – $35,000. The average closing cost for homebuyers in DC is $30,352, according to the Washington Post.
On average, home sellers pay about 7% – this includes the commission fees for both agents. In DC, selling a $600,000 home will cost roughly $45,500.
How Can I Pay for Closing Costs as a First-Time Homebuyer in DC?
Not surprisingly, it can be incredibly difficult to pay, let’s say, $50,000 in down payment fees — then go on to pay $30,000 or so in closing costs. Many first-time homebuyers simply don’t have this much cash on hand.
One thing to keep in mind is that a 20% down payment is not required, and in fact, often isn’t the best financial choice. Depending on the lender, homebuyers today can put down as little as 3.5%.
You can also apply to down payment assistance programs and put the money you would’ve used on the down payment toward closing costs instead. In DC, the Home Purchase Assistance Program (HPAP) gives up to $84,000 in down payment and closing assistance to eligible first-time homebuyers.
Another silver lining to the closing cost dilemma? At The Jenn Smira Team, we’ve been consistently succeeding at obtaining seller credits of around 3%, on average, to offset the buyer’s closing costs. In fact — some lenders will even support up to 6% in seller credits. What does that mean for you? That as a buyer, you could have all your closing costs paid by the seller at settlement to buy down the rate for 2 years…before refinancing when interest rates dip back down.
