Before you settle into Montana’s big skies and open spaces, you’ll need to pay for closing costs to secure the keys to your new home. These costs, which range from lender fees to local taxes, are one of the final parts of the homebuying process. Knowing what’s ahead will help you cross the finish line and start enjoying all that Montana has to offer, from mountain views to quiet mornings on the porch. This Redfin article will dive into how much closing costs are in Montana, who pays for them, and what costs you can expect to pay as a buyer and as a seller.
How much are closing costs on average in Montana?
Before securing the keys to your new home, homebuyers will need to pay for closing costs. You can expect closing costs in Montana to add up between 2%-5% of the purchase price. However, keep in mind that closing cost amounts vary depending on a few factors – such as the purchase price of the home, the type of loan, and any adjustments negotiated with the seller.
For example, if you’re buying a home in Billings, which has a median sale price of $399,900, closing costs could range anywhere from $7,998 to $19,995. Or, let’s say that you’re buying a home in Missoula, which has a median sale price of $599,000. Closing costs for a home here could add up anywhere from $11,980 and $29,950.
Who pays closing costs in Montana?
In most areas, including Montana, both the buyer and the seller will pay closing costs. But the buyer and seller will pay for different closing costs and likely have different total closing cost amounts. Another thing to keep in mind is that buyers typically pay for closing costs out of pocket, while the seller’s closing cost payments are often deducted from the home sale proceeds.
Buyer closing costs in Montana
For homebuyers in Montana, you can expect closing costs to range 2%-5% of the purchase price. In most cases, you’ll pay earnest money, typically 1% to 3% of the home price, upon reaching mutual acceptance in your home purchase. This deposit is subtracted from your closing costs, reducing the total amount due at closing. Below are some of the common closing costs paid for by the buyer:
- Appraisal fee: Your mortgage lender will require a home appraisal to ensure the home value is equal to or more than the loan amount. Home appraisals typically cost between $300 and $500, depending on location. If you pay at the time of service, it will not be included in your closing costs.
- Inspection fee: Although not required, a home inspection is highly recommended. Home inspections generally range from $300 to $500 in cost and are usually paid at the time of service. However, if not, it will need to be paid at closing.
- Loan origination fee: Your lender may charge a fee for creating your loan. It’s important to inquire about what this cost covers and whether it’s negotiable to potentially avoid high costs.
- Loan processing fee: Lenders may also charge a loan processing fee, covering underwriting and related services. Similar to the origination fee, check with your lender to understand its purpose and possible waivers.
- Loan discount points: If you buy discount points to lower your interest rate, you’ll pay a one-time fee at closing. These points can lower your rate by 0.25% to 0.5%, but consider your long-term homeownership plans before paying for a reduced rate.
- Private mortgage insurance (PMI): Required for down payments under 20%, PMI might involve an upfront fee at closing, depending on the loan type. It’s usually part of your monthly payment, but some loans offer the option to pay it as a one-time fee.
- Title insurance: Title insurance is a one-time closing cost, with buyers commonly paying for both lender and owner policies.
- Homeowners insurance: Your annual homeowners insurance premium may be included in your closing costs in Montana.
- Homeowners Association dues: For homes in HOA-managed communities, you might have to pay one month’s dues at closing, which can vary depending on the property and covers maintenance and operational expenses.
- Property taxes: As part of closing costs in Montana, you may be required to prepay a portion of your property taxes at closing.
Seller closing costs in Montana
The closing costs covered by sellers in Montana can vary, but here are a few common closing costs that sellers pay for:
- Real estate agent commission fees: These fees can be a significant cost for sellers. Commission fees may vary and are subject to negotiation. Sellers should discuss their options with their agent.
- Homeowners Association fees: If the property is part of an HOA, the seller may need to pay a variety of fees. These can include HOA transfer fees, outstanding dues, and possibly a fee for obtaining HOA documents required by the buyer. The exact fees will depend on the HOA’s rules and regulations.
- Property taxes: Any outstanding property taxes will be due at this time. However, if the seller has prepaid property taxes for the period that extends beyond the closing date, they may be credited back for the portion they’ve paid but won’t use.
- Title insurance: Sellers typically cover the cost of the buyer’s owner’s title insurance policy. This policy protects the buyer from any potential title issues that may arise after the property is sold. The cost of title insurance can vary but is generally based on the property’s sale price.
Median home sale price data from the Redfin Data Center during July 2024.
