Buyer Closing Costs

July 23, 2021



Have you decided to buy a house but aren’t sure what it’s going to cost you when you find the right one? In this episode of Naturally NWA, I’m going to walk you through the closing costs you can expect to pay when you purchase a property here in Northwest Arkansas. We’ll look at everything from lender fees to inspection costs so you won’t be surprised at the closing table.

Down Payment And Loan Fees

While buying a house is exciting, it’s important to know exactly how much it will cost you. The best homes sell fast, so you should be ready to act when you find what you’re looking for. Part of being ready is understanding the process, having an idea of what your baseline budget is for closing costs.

The first and often largest out-of-pocket cost is going to be your down payment. The downpayment percentage can vary based on the type of loan, so it’s very wise to start speaking to a lender early on in the process. This will give you an idea of what kind of financing fits your needs and your financial situation the best.

Now that the down payment is out of the way, let’s talk about the actual transactional costs of purchasing a house here in Northwest Arkansas. These are the costs of doing business that occur when you buy a house. The first costs you’ll see on a closing statement are your loan fees—assuming that you are financing, of course.

Depending on how your lender structures your loan, you could get charged what are called ‘points.’ This means you’re paying your interest upfront or buying down your interest rate. Your lender will also charge you for an appraisal, a credit report fee, processing and underwriting fees, and flood certification. These charges can vary by lender and the size of the property, but a good estimate for an average-sized home here in Northwest Arkansas would be around $1,100.

Mortgage Insurance And Title Fees

Your lender might also structure it so that you pay mortgage insurance upfront. Mortgage Insurance protects the lender in case you default on your loan. It’s required on some different types of loans or if you put less than 20% down.

The title company is also going to collect advanced homeowner’s insurance and property taxes from you as required by your lender. The amount they charge varies by lender, but they could collect anywhere from a few months upfront to a full year. All of these things are handled by an escrow account that is also set up by the title company.

The rest of your closing costs are title fees. The title company is going to charge you for a title insurance policy, which guarantees that when the title is transferred to you, it is transferred without any records or events that would affect ownership (like a lien or a levy). The cost of title insurance is based on the selling price of the property and varies by title company.

Insurance, Taxes, And Inspections

In Arkansas, it’s common for a $25 charge to appear on your settlement statement for a closing protection letter. This is another insurance policy that protects your money as it travels to the wire from your lender to the title company and back to the seller. You’re also going to see other charges such as closing fees, recording fees, and title services fees. These will probably add up to around $700.

The next costs you’ll see are charges for tax stamps as part of the Real Property Transfer Tax. The way to figure out this tax rate is that it’s $3.30 per $1,000 of actual consideration on all transactions that exceed $100. Another cost we’ll assume shortly after you get an accepted contract on a property is the cost of the home inspection. In Arkansas, you have 10 business days to do all the inspections you need.

Most people choose to hire a general home inspector first. Additional inspectors can be hired if recommended by the general inspection. The home inspectors I work with most frequently are going to run about $350 for a home inspection.

Counting The Costs

I hope this helped give you an idea of your closing costs when purchasing a property in Northwest Arkansas. Naturally, it’s very important to understand these closing costs upfront so that you can budget for them. Your closing costs will ultimately be dependent upon several factors, so if you’d like to get a better estimate on what yours might be, please feel free to give me a call. I help people just like you buy and sell real estate every day, and I would love the opportunity to help you out as well.

If you have any additional questions, make sure you reach out to me and I’ll be happy to connect. Don’t forget to subscribe to my channel so you never miss an episode of my show, all about Northwest Arkansas. Stay tuned to see what I feature next!