You’ve found your dream home, saved for your down payment, and secured a mortgage. Now, as the closing approaches, you have one last obstacle: closing costs.
Closing costs are all the administrative and legal services you’ll need to pay for to complete your Home Buying adventure. For convenience’s sake, along with your down payment, you’ll pay these costs in a lump sum on closing day. Typically, closing costs to amount to 2% – 5% of your new home’s purchase price.
If you’re buying a new home, we’ve got the low down on closing costs in Rhode Island. We’ve included how much you should save and a breakdown of what’s generally included.
How Much are Closing Costs in Rhode Island?
According to NAR, buyers in Rhode Island can expect to pay around 1.4% of their home’s final sale price in closing costs. As of September 2022, the median price for a house in Rhode Island was $437,000. Using that figure, you’d pay around $6,100 towards closing costs in Rhode Island.
Bear in mind, your total closing costs will vary depending on the price of your home, its location, and the complexity of the sale.
Who Pays Closing Costs in Rhode Island?
Buyers and sellers each pay unique closing costs to finalize a home sale. In Rhode Island, sellers typically pay for the title and closing service fees, owner’s title insurance policy, transfer taxes, and recording fees at closing. Optional costs for sellers include buyer incentives, pro-rated property taxes, or for an attorney. Buyers usually pay for things like a mortgage, appraisal, and inspection fees.
What’s Typically Included in Closing Costs in Rhode Island?
The easiest way home buyers can stay on top of closing costs in Rhode Island is by grouping them into two groups; mortgage-related and property-related. Every state also has its own regulations you’ll need to follow, from hiring a lawyer to paying for real estate transfer taxes. Here’s what to expect in Rhode Island.
Mortgage-Related Fees
You’ll incur these closing costs in Rhode Island from your mortgage lender.
- Loan Origination Fees – You’ll be charged about 0.5 % to 1 % of your total mortgage to set up your home loan. Your lender charges this fee for the paperwork involved in preparing your home loan, from the application and underwriting to providing preapproval letters and processing the funding at closing.
- Credit Report Fee – Lenders check your credit to determine if you’re a responsible borrower. They pull your credit report with the various bureaus to take a deep look at how well you manage debt, and they’ll pass along the charges to you.
- Private Mortgage Insurance – If you don’t have a 20 percent down payment, your lender may add private mortgage insurance (PMI) to your loan. While you pay for the insurance, the coverage is for your lender in case of default. PMI typically ranges from 0.25 percent to 2.25 percent of the loan, depending on the size of your down payment and credit score. Once you hit 20 percent equity in your home, you won’t be required to carry PMI.
- Attorney Fees – Rhode Island requires home buyers to have legal representation during the closing process. That means you’ll need to hire a lawyer to examine the title and review the deed to the property. They’re also essential in drafting your purchase agreement, checking your mortgage contract, and ensuring your insurance policies are ironclad. The cost of hiring a real estate attorney in Rhode Island will vary, depending on the home’s location, what services you require, and the complexity of the sale.
- Escrow Fees – While your attorney will deal with the legal facets of your closing, a title company or escrow agent will set up an escrow account to hold your various deposits, like your down payment and property taxes. With a third-party escrow account, your seller and other vendors won’t get paid until all parties meet their obligations on the home sale and the contract is finalized.
Property-Related Fees
Here are the main property-related fees you’ll see on your closing costs in the Rhode Island bill:
- Title Search – Your lawyer will arrange for a title search on your new home to ensure you’re buying a free and clear property for you to own. A title examination involves searching historical title documents like deeds, court records, and property indexes to ensure the land isn’t tied up in litigation, unpaid taxes, or other issues you’d inherit once you take ownership. The home buyers pay for this. It’s your lawyer’s job to examine the title search results and determine whether you’re in the clear to proceed with the purchase.
- Title Insurance – To guard anything that’s overlooked in the title search, home buyers must buy title insurance for both you and your lender. It’s one of several insurance policies, including homeowner’s insurance and PMI (if applicable), that you have to purchase before your lender allows the loan to close. It covers you and your lender in case of “title defects” or if something is missed during the initial title search. The insurance will cover court and related fees if your ownership is questioned. It’s a one-time expense that remains in effect until you sell the property. In Rhode Island, home buyers typically pay for both policies, along with the title search.
- Appraisal – Your lender will require hiring 3rd party licensed professional to appraise the property to ensure it’s priced at the right value. This is a safeguard for the lender so they know that if you default on your mortgage loan and your property goes into foreclosure, they can resell the home and recover its costs. The appraiser will evaluate the home’s size, features, and condition, as well as how it stacks up to homes priced similarly in the community, to determine its fair market value.
- Home Inspection – While the appraiser calculates the property’s market value, a home inspector focuses on the health and safety of your potential new home. This step is just as critical as the appraisal. The inspector will examine everything from the foundation to the roof and the condition of major appliances, the plumbing, HVAC systems, electrical work, and every little detail. Not only will the inspection note any existing issues, but they can also forewarn you of troubles that could arise in the coming years. This information can be used to renegotiate the price with the seller or have them make repairs before finalizing the deal. The inspection can also lead to the buyer canceling the contract and getting a refund of all earnest money deposits if major defects are discovered.
The Spectrum Real Estate Consultants Team is the top producing team of Realtors at Keller Williams Realty Leading Edge completing over 900+ successful transactions since 2015. Our mission is to provide our clients with world-class service while simplifying the Real Estate transaction through experience, technology, and effective communication.
Our team members are licensed and serve their local communities and, like our valued clients, we own, renovate and manage properties throughout these markets, allowing us to truly understand the process, challenges, and benefits of buying real estate in Rhode Island. Our knowledge and professional experience allow us to identify opportunities and prevent unnecessary setbacks, in the end saving you time, money and frustration. So, if you’re ready to buy a house, let’s connect.