Most First Time Home Buyers are aware of down payment costs, but are not aware of closing costs. These are costs that go towards your legal fees, title insurance, and a few other costs that amount to anywhere between 1-4% of the purchase price of your new home.
It is worth noting that when applying for a Mortgage, most lenders require that you show proof of at least 1.5% of the purchase price, even though you might end up paying less than that amount!
For example, 1.5% of a $500,000 home is $7,500. This is what the lender would want to see as closing costs over and above the down payment funds. You might end up paying a total of $5,000 in closing costs, yet the lender would still need to see $7,500 as proof of closing costs.
