Buying a new home is an exciting and big decision, whether it’s your first time or not. But before you get carried away shopping for furniture, picking new colors for your bathroom, or redesigning your backyard, you’ll need to factor the costs of the process into your budget.
Closing costs are the fees and expenses incurred in finalizing a real estate transaction and transferring ownership of the property from seller to buyer. Don’t worry if you’re unprepared or feeling overwhelmed. To help you budget for closing costs, this Redfin article explains what closing costs are in Massachusetts, who pays them, and what costs buyers and sellers can expect to pay.
How much are settlement costs in Massachusetts?
Before receiving the keys to their new home, homebuyers must pay closing costs. On average, closing costs in Massachusetts typically range from 2% to 5% of the home purchase price. However, it’s important to remember that this is just a range, and the total amount will depend on a variety of factors, including the buyer’s loan program and negotiations with the seller.
For example, say you’re buying a home in Boston. The average sale price of a home in Boston is $797,000. Based on this, you can expect your closing costs to be between $15,940 and $39,850. On the other hand, if you’re buying a home in Milton, the average sale price is $955,000, so your closing costs could be between $19,100 and $47,750.
Who pays settlement costs in Massachusetts?
In most places, including Massachusetts, both the buyer and seller pay closing costs. However, the amount of each party’s closing costs will vary depending on what they are required to pay. Also, keep in mind that while buyers typically pay their own closing costs, sellers’ payment of closing costs is often deducted from the sale price of the home.
Massachusetts Buyer Settlement Costs
Closing costs for buyers in Massachusetts typically range from 2% to 5%. In most cases, you’ll pay a deposit (usually 1% to 3% of the home price) once both parties have come to an agreement to purchase the home. This deposit is deducted from your closing costs, reducing the total amount due at closing. Let’s look at some common closing costs that buyers incur:
- Appraisal fee: A home appraisal typically ranges from $300 to $500 and is paid separately when you obtain the service, but if not, it must be paid at closing.
- Inspection fee: A home inspection typically costs between $300 and $500, but can vary based on local rates and the specific features of the property. If you don’t pay for the inspection at the time of the inspection service, you will be required to pay at closing.
- Loan Fee: Most lenders will charge a fee for originating the loan, so be sure to ask your lender what this fee includes and whether it can be waived or negotiated.
- Loan Fee: In addition to origination fees, lending institutions may also charge a loan processing fee. This fee typically covers underwriting and related services. We recommend that you discuss with your lending institution what this fee applies to and whether it can be waived.
- Loan Discount Points: If you buy discount points to lower your interest rate, you’ll pay a one-time fee at closing. These points can lower your interest rate by 0.25% to 0.5%, but consider your long-term homeownership plans before paying a discounted rate.
- Private Mortgage Insurance (PMI): PMI required for a down payment of less than 20% may have an upfront fee at closing, depending on the type of loan. It’s usually part of your monthly payments, but some loans offer the option to pay it as a one-time fee.
- Title Insurance: Title insurance is a one-time expense incurred at closing, and the buyer typically pays both the lender’s and owner’s premiums.
- Homeowners Insurance: In Massachusetts, your annual homeowners insurance premium may be part of your settlement costs.
- Homeowners Association Dues: If your property is part of a homeowners association, you will pay one month’s dues up front at closing. These fees vary and contribute to maintenance and operating costs.
- Property Tax: In Massachusetts, you may be required to prepay a portion of your property taxes at closing as part of your closing costs.
Massachusetts Seller Closing Costs
Closing costs incurred by sellers in Massachusetts vary, but here are some of the more common fees and costs that sellers pay:
- Real estate agent fees: These fees can be a significant cost to sellers. Fees may vary and are subject to negotiation. Sellers should discuss their options with their agent.
- Homeowners Association Fees: If the property is part of an HOA, the seller may be required to pay various fees. These may include HOA transfer fees, outstanding dues, and fees for obtaining any HOA documents required by the buyer. The exact fees will vary depending on the HOA’s rules and regulations.
- Property Tax: The seller is responsible for paying any property taxes accrued but not yet paid through the settlement date. These unpaid property taxes are usually prorated according to the number of months the seller owned the property.
- Title Insurance: Owner’s title insurance is another common closing cost paid by the seller in Massachusetts.
- Transfer Tax: Depending on location and local regulations, Massachusetts sellers may be obligated to pay state and local transfer taxes. Transfer taxes are typically based on the sales price of the property and are levied when ownership of the property is transferred from seller to buyer.
July 2024 median home sales price data from Redfin Data Center.
