Closer To Pittsburgh

I came across an interesting question today and thought it would make a nice little post.  Simple: What are closing costs when buying with no mortgage?  Well, the short answer is usually less than when buying with a mortgage.  But to try to be more specific, here’s a break down of different costs and whether you pay them with and/or without a purchase with a mortgage.  Keep in mind these are general and there are always exceptions where the costs may exceed what I describe.

• Tax prorations – Paid on all transactions (unless agreed otherwise which is rare)
• Administrative fee/additional commission to real estate broker – range from $0 to $400 - Paid on all transactions
• Appraisal fee – range from $250 to $500 – Paid only on transactions with a mortgage
• Credit report – range from $10 to $40 – Paid only on transactions with a mortgage
• Tax service fee – range from $60 to $100 – Paid only on transactions with a mortgage
• Loan origination fee/discount points – range from $300 to thousands if multiple points paid to buy down rate – (duh) only on transactions with a mortgage
• Interim interest – range from $0 to thousands based on date of closing, interest rate, amount of loan, etc. – Paid only on transactions with a mortgage
• Up-front mortgage insurance – typically a percentage of the loan amount – rare outside of FHA mortgage transactions, never on cash transactions
• Hazard (aka homeowner’s) insurance – range from few hundred to over a thousand – required on mortgage transactions, but definitely should not go without on a cash transaction either
• Escrow deposit – range from zero to thousands of dollars – Paid only on transactions with a mortgage (although ultimately the taxes are paid no matter what, escrow is just a way station)
• Title insurance – range from (in PA) $378 to thousands based on purchase price – Required on mortgage transactions but absolutely should be purchased on cash transactions also
• Title endorsements & closing protection letter – range from $225 to $325 – Rare outside of mortgage transactions
• Recording fees – range from $50 to $130 (occasionally more when additional documents are to be recorded) – less when a cash transaction, but always a cost of some amount
• Realty transfer tax – range from 2% to 4% of the sales price – Paid regardless (there are exemptions for certain transfers though

Keep in mind that there are other costs that will pop up from time to time on mortgage transactions.  Some of these might include a pest inspection or a well or septic test if the property is not connected to the public system.  Each of these costs could merit it’s own separate post (it might kill the modest readership numbers I have though).  But there are ways to save whether the purchase is with or without a mortgage.  It takes a little extra effort, but it is certainly worth the trouble.