How to Calculate Closing Costs When Paying Cash for a Home

by Lisa Bigelow

Those who are flush enough to purchase a home outright with cash save a bundle avoiding interest payments that mortgage borrowers must pay. They also avoid thousands of dollars in closing costs. While mortgage borrowers must pay a variety of fees, all-cash buyers avoid them because they aren't subject to a lender's underwriting process. Nevertheless, even cash buyers must pay some closing costs; these include the hazard insurance premium, the title search and policy charges, pro-rated property taxes and attorney fees.

Secure a homeowner's policy estimate. You'll need to know the home's square footage, the lot size and other identifying characteristics, such as whether the home has a pool. Estimates often vary significantly among insurers, so take the time to price at least two policies. If the home is in a flood plain, you may need additional coverage.

Price the title search and policy. While homeowners who pay cash aren't required to purchase a title policy, it's wise to purchase one anyway. The search examines the property's past to identify potential ownership claims against the property, and the title policy protects your initial investment against them. Title policy costs are paid once at the closing and vary depending upon the home's size and cost.

Price the property taxes based on the current owner's tax bill. You may need to write a check to the current owner if she has paid taxes for the period of time that you'll own the home. Your attorney will be able to provide you with an accounting of the seller's tax payments.

Pay your attorney. At the closing, you'll need to pay your attorney for the work he did closing the deal; the fee will be separate and apart from the title search and policy work.

Items you will need

  • Details about size and characteristics of property
  • Hazard insurance estimate
  • Title search fee
  • Title policy fee
  • Tax bill
  • Attorney fee

About the Author

Lisa Bigelow is an independent writer with prior professional experience in the finance and fitness industries. She also writes a well-regarded political commentary column published in Fairfield, New Haven and Westchester counties in the New York City metro area.

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