The cost of housing is rising at a much faster rate than wages and salaries, especially in this pandemic. The issue of housing affordability has presented itself front-and-center in this health crisis. With housing costs on a constant incline, Oregon homebuyers investing in real estate are asking how much are closing costs in Oregon?
When it comes to buying an investment property, regardless of how you intend to use it, the cost of housing is perhaps the most critical component of housing affordability. And when it comes to the Oregon housing market, the numbers can get really high.
Those who are looking to buy a property or have already found one in Oregon should know that there’s more to housing costs than just the downpayment on the property. For this reason, buyers should be aware of the other expenses involved in real estate investment, especially the closing costs.
What are Closing Costs?
When buying any type of property, it is very important to note that on top of the mortgage, buyers also need to pay for certain fees and charges known as closing costs. These are additional charges that are determined by several factors such as the type of loan program acquired, down payment, property type, credit score, and occupancy. The amount of closing cost for a property will depend on the buyer’s exact scenario.
Besides asking how much are closing costs in Oregon, another common question is who pays closing costs in Oregon? Closing costs are incurred by both the buyer and the seller to complete a transaction. So if a potential buyer is in the market for an income property looking to make a great return on investment, he or she needs to factor in closing costs to ensure the best possible returns.
How Much are Closing Costs in Oregon?
Let’s cut right to the chase. According to Bankrate, the average closing cost in Oregon is $2,122 which is inclusive of third-party and origination fees. This amount, however, does not include other variable costs and incidental charges such as:
- Title insurance
- Escrow deposit
- Title search
- Government fees
- Taxes
- Discount points
One should expect to spend an excess of 2% to 5% of the total purchase price. The median listing price in the Oregon real estate market is currently $379,900. That being said, buyers and investors should prepare between $7,598 and $18,995 overall.
So to keep the math simple, let’s say you’re buying a property that costs $200,000. Your overall closing costs will fall between $4,000 (2%) and $10,000 (10%).
That might seem like a pretty wide range. This is why it’s always best to perform your due diligence and work with a credible local real estate agent. If you don’t know where to look for the right agent, check out Mashvisor’s real estate agent directory. It can help connect you to an experienced local agent who can help guide you through the entire process.
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What are the Things Included in the Closing Costs?
When buyers and investors ask themselves, “how much are closing costs in Oregon,” they need to understand that there are several factors that affect the overall amount of the closing cost.
Here are the most common closing cost charges a buyer will encounter:
Credit Score Acquisition Fees
Before a loan application, lenders need to pull the applicant’s credit report from the three main reporting bureaus. This allows the lender to see if an applicant is qualified for a loan. Credit score acquisition fees typically go for $30 to $60 in Oregon. While this is shouldered by the prospective home buyer, there are cases where lenders don’t charge for this since they get discounts from the reporting agencies. It is still best to include this in your budget, though.
Mortgage Origination Fees
An origination charge is in place to cover any administrative cost the lender incurs for the creation and processing of a loan. This is usually 1% of the loan amount, although it may vary and can be negotiated depending on the risks involved in the loan and the buyer’s creditworthiness. Some lenders don’t charge origination fees but have higher interest rates to cover the costs.
Home Appraisal Fees
To determine one’s loan-to-value ratio or LTV, a property’s fair market value needs to be known. For this reason, a professional home appraiser’s services are needed to assess the property value. It typically goes between $300 and $500, depending on the property type, location, and size.
Attorney’s Fees
While the state of Oregon does not require the assistance of an attorney for real estate transactions, it is still highly recommended. An attorney can come in to help resolve any title defects that need to be addressed.
Surveying Fees
Surveying fees in Oregon fall within the $350 to $500-range. These are used to pay professional surveyors to determine a property’s boundary, location, and legal description that will appear in the title.
Discount Points
Discount points are optional payments made upfront to reduce the interest rates on the loan. Think of them as some sort of prepaid interest rates that could lower your overall monthly mortgage payments. One point is equivalent to 1% of the loan amount. While this may save a buyer some money, in a low-interest environment, it might not make a significant dent on your monthly mortgage which doesn’t make it worth the trouble.
Title Search
Title searches are done to ensure that a property does not have any ownership discrepancies or tax liens attached to it. The process incurs anywhere between $75 to $200 in Oregon.
Title Insurance
In the event that a person or entity challenges your ownership of a property, a title insurance policy is there to protect you. This type of indemnity insurance also protects a title owner against any losses from title defects like outstanding taxes, liens, and any violations that belong to previous owners. It usually goes for 0.5% to 1% of the property’s purchase price.
Escrow Deposit
While not all lenders require this, some ask buyers to deposit two months’ worth of property taxes and mortgage insurance payments into an escrow account upon closing. Escrow fees include the recording of the deed and other paperwork along with the fund’s exchange. Having an escrow in place at closing ensures the safety of the buyer’s earnest money.
Private Homeowners Insurance
Homeowners’ insurance policies cover property damages and legal responsibility or liability in case any injuries take place on the property, even damages or injuries caused by household pets. The property’s first-year insurance is usually paid at closing. In Oregon, the average annual premium for homeowners’ insurance is $643. Factors like location, property size, and assets can affect the premium.
Recording Fee
Recording fees, or transfer taxes, are charged by local governments for the recording of a property’s sale since they are the ones in charge of documenting home ownership records within the city or county. Depending on the county that a property is in, the usual recording fees in Oregon range from $80 to $100.
Underwriting Fee
Underwriting is a very tedious process in loan approvals. It involves researching and verifying a loan applicant’s financial, employment, income, and credit information to see if he or she is qualified for the loan applied for. Although this will vary depending on the applicant’s situation, underwriting fees can go as high as $800.
Prepaid Costs
Prepaid costs are some things that lenders require to be paid for in advance. This includes property taxes, homeowners insurance, and rental property insurance. Prepaid costs are listed by the lender and put in an estimate of closing costs called The Good Faith Estimate which is given within three days of the loan application.
Property Taxes
Property taxes are based primarily on the property’s fair market value. In Oregon, homes with a median value of $257,400 are charged with a $2,241 annual property tax. Oregon counties collect an average of 0.87% as property tax each year.
Reducing Closing Costs in Oregon
More than asking how much are closing costs in Oregon, buyers should also ask themselves how they can reduce closing costs in Oregon.
Shop Around
Homebuyers need to shop around and make comparisons. Different lenders and third-party services offer different products. Knowing the different fees and comparing them all can significantly reduce the closing cost amount.
Set the Closing at the End of the Month
Buyers can save a lot of money on prepaid daily interest charges if they schedule the closing near or at the end of the month.
Negotiate
Buyers should not hesitate to speak up and try to negotiate better deals on all the expenses that are incurred in the process.
When in Doubt, Speak Up
If a buyer feels that unnecessary fees – or junk fees – are added to the loan or services or if he or she is confused with certain terms within the contract, policy, or document, speak up and ask questions. Most of the time, buyers don’t bother to go over these things with a fine-tooth comb. But it is highly recommended that any buyer go over each document, process it diligently, and ask for clarification when needed.
The Bottom Line
The question of how much are closing costs in Oregon can be easily answered by performing due diligence and connecting with a local real estate professional. It is highly recommended that anyone looking to buy property in Oregon – or in any state, for that matter – needs to be well informed with all the expenses tied to purchasing a property.
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