Congratulations, you're about to close on a home in the Keystone State! Pennsylvania is full of natural wonders, cultural hotspots and some of the best educational and professional opportunities in the country.
Yet, before you can stake your claim to property here, you'll need to go through the real estate closing process, first.
Not sure what to expect? These next few steps vary by state, so it's important to know what you're getting into. Today, we're sharing a quick guide to Pennsylvania closing costs.
Ready to learn more? Let's dive in!
Breaking Down the Typical PA Closing Costs
You've already agreed on a price for the property with the seller's real estate agent. It's likely taking a significant chunk of your savings to cover the down payment alone.
So, why must you shell out even more for closing costs? To help you understand what this charge covers, let's break down the most common types found in Pennsylvania.
The Appraisal Fee
Today, most traditional lenders will only provide you (the buyer) with a portion of money relative to your new home's value.
How do they know that value? They hire a licensed real estate appraiser to appraise the property prior to your loan approval. This person will use a formula to calculate your home's value and overall condition.
If any issues arise during the appraisal such as a structural concern or water damage, the appraiser may contact a home inspector for further investigation. In Pennsylvania, the typical appraisal costs between $600 and $610. Keep in mind that you'll pay more for an appraisal of a multi-family property.
Courier Fee
While the term is a bit outdated, a courier fee refers to the price you pay for your settlement company to overnight your closing documents to your lender. This fee should be around $25.
Closing Protection Letter
The settlement company will require a Closing Protection Letter (CPL) from your lender. This document and fee ensure that the settlement company will handle the transaction with care and integrity or else reimburse the lender.
The Pennsylvania Department of Insurance sets the $125 CPL fee.
Credit Report
Your lender needs to verify your creditworthiness and can't do so without taking a look at your credit score. The cost to pull a report can range from $15 for a simple request to upward of $50 or more for merged ones.
Deed Transfer Tax
The state of Pennsylvania requires that property buyers pay a fee to have a deed transferred over to their name. In most cases, the seller and buyer will split this fee 50/50, but individual sales contracts have the final say.
The state taxes the deed transfer at a rate of 1% of the property's sale price. So, you'll pay (or split) a $1,000 fee for a home that costs $100,000. In addition, some municipalities and school districts charge their own 1%, in addition to the state's charge.
Other Minor Fees
There are other minor charges you may notice on your closing costs form. These fees cover the following steps:
- Document downloads (around $65)
- Flood certification (around $8 to $10)
- Notary services (around $35)
- Pest inspection (around $50 to $100)
- Mortgage Application Processing (around $700 to $1,000 depending on the lender)
- PA real estate agency fee (around $500)
- Final document recording (around $335)
- Underwriting (around $225)
Note that you may see all of these or a portion of these, depending on your unique scenario. In addition, there are other fees not listed on here that your lender or settlement company may require.
Title-Related Charges
Your lender will require that you carry title insurance.
The fee you pay helps cover the task of searching the property to make sure the sellers really own it to the full extent. If there are any issues with this ownership, they can affect your closing process, so it's important to double-check.
The PA Department of Insurance will set your premium depending on the property value and other factors.
If you choose to go above and beyond with your title insurance policy, you can also pay for title endorsement, which runs around $150.
Per-Diem Interest
In addition to your other closing costs, you'll pay your lender interest on the loan amount from the closing date to the last day of that month. Planning to close on the last day of the month? If so, you'll only pay one day's worth of per-diem interest.
The formula to calculate this cost is simple:
Multiple your loan amount by your interest rate to get your total interest amount. Then take this number and divide it by 365. That's your per-diem interest.
Multiply this number by the number of days between your closing date and the end of the month. This is how much you'll need to set aside to pay at closing.
Seller Closing Costs in PA
While the above cover what buyers in PA can expect to pay, sellers will have to bring money on the closing date, as well.
Some of the most common seller closing expenses include:
- Broker services
- Deed preparation (around $150)
- Deed transfer tax (split with the buyer)
- Document preparation
- Home warranty (around $480)
- Mortgage pay-off
- Realtor commission
- Agreed-upon seller cost contributions
- Settlement fee (around $150)
- Overnight pay-off ($15 to $25)
- Tax certifications and prorations
- Occupancy permit
Depending on your contract, you may pay all or some of these fees. It's important to work with your agent to understand your financial obligation.
Navigate Pennsylvania Closing Costs with Ease
Buying a home is a major step and an exciting one at that. However, it can also put you in a financial bind if you aren't prepared.
This is especially true if you've decided to sell your home in PA. Pennsylvania closing costs can be hefty and cut into any gains you expected to make during the sale.
That's where a cash sale can help.
When we buy your home for cash, we'll do so in a quick and fair way, helping you avoid many of the tangles and costs associated with the traditional closing process. Contact us today to learn more and let us take care of the rest.