Great Plains, towering mountains, a thriving agricultural industry, and bustling cities – it’s easy to see why homebuyers are drawn to Nebraska. While you may be saving for a down payment to buy your dream home in the Cornhusker State, just make sure you have the cash on hand for closing costs, too.
If you’re thinking of buying a home, securing a mortgage, and saving for a down payment usually come to mind. But there’s another expensive hurdle to clear: closing costs. In a nutshell, closing costs encompass all the fees homebuyers must pay prior to receiving the keys to their new home. Think of it this way: securing a home loan isn’t free – you must pay for the services of your mortgage lender, attorney, appraiser, inspector, and the title company that’s managing your closing. Don’t forget annual property taxes, HOA fees, and homeowner’s insurance, too! All in, closing costs typically amount to two to five percent of the home’s purchase price, paid alongside the down payment.
Because closing costs can vary by state, here’s a look at what you can expect to pay in Nebraska, what’s typically included on your bill, and how you can potentially lower these costs.
How Much are Closing Costs in Nebraska?
Closing costs in Nebraska are, on average, $2,007 for a home priced at $165,050, according to a 2021 report by ClosingCorp, which provides research on the U.S. real estate industry. That price tag makes up 1.22 percent of the home’s price tag.
The Cornhusker State has affordable closing costs, ranking 15th with the least expensive closing costs in the country. Overall, it’s safe to say closing costs are cheaper in the Midwest – Missouri, Indiana, Iowa, South Dakota, and Wisconsin are among the top 10 states with the lowest closing costs. In Missouri, for example, closing costs are a mere $1,290 for a home priced at $177,915. For comparison’s sake, the national average for closing costs is $6,087.
But homebuyers in Nebraska should count on spending far more than ClosingCorp’s estimates; its data excludes expenses, such as loan origination fees and private mortgage insurance if you don’t have a 20 percent down payment. Both expenses easily add thousands of dollars to your closing costs bill.
Keep in mind, closing costs will fluctuate greatly depending on the price of your home and the complexity of the sale.
What’s Typically Included in Nebraska’s Closing Costs?
When it comes to understanding the bill breakdown of your closing costs, the expenses start tallying up as soon as you apply for a home loan. Typically, closing costs can be divided into three categories: property-related fees, mortgage-related fees, and annual fees.
Let’s look at some of the common closing costs you’re likely to incur in Nebraska, including the state-specific details:
Unless you’re buying your new home with cold hard cash, your first stop in the homebuying process will be to a lender to apply for a mortgage. These are some of the lender fees you might need to pay:
Loan Origination Fees
Expect to spend about 0.5 to one percent of your loan amount on loan origination fees. This is what your lender will charge for preparing your mortgage, from the loan application to processing your funding at closing.
Credit Report Fee
During the underwriting process, your lender must check your credit report to see how you’ve managed debt in the past. You will be charged for fees involved with requesting your credit report from the various credit reporting bureaus.
If more than one borrower is involved, double this expense because your lender will need to check both credit reports.
Private Mortgage Insurance
If you aren’t providing a 20 percent down payment, your lender will expect you to buy private mortgage insurance (PMI) in Nebraska. PMI allows borrowers to qualify for a conventional loan even if they put down only five to 19.99 percent of their mortgage.
While you’re the one paying for the insurance, the coverage is for your lender in case of loan default.
This cost isn’t included in the ClosingCorp tally of closing costs expenses, but PMI typically ranges from 0.25 percent to as high as 2.25 percent of your loan, depending on the size of your down payment and credit score. Once you hit the 20 percent mark in home equity, you no longer need to carry PMI.
Homebuyers may decide to hire a title company or escrow agent to manage the closing process to make sure you get to closing day without any hiccups along the way.
One of their key roles is to set up a neutral third-party escrow account for your earnest money deposit, payment for various fees, and down payment. These funds won’t be released until the ink is dry on your home purchase and all parties involved have met their conditions on the home sale.
Your title company will also guide you through the checklist of things you need to complete by closing. It’s customary to split this cost between buyer and seller in Nebraska.
While it isn’t mandatory in Nebraska, you may decide to hire a real estate attorney to help with the legal aspects of your closing.
An attorney can draft your purchase agreement, certify deeds, and review your home insurance and title insurance policies to make sure they cover you adequately. Your real estate agent or title company may also recommend that you hire a lawyer if your home purchase is a complex one, such as if you’re buying a property that’s in foreclosure or buying from outside of the state.
From the home inspection to the appraisal, these property-related fees are essential purchases to ensure you’re making a wise purchase. These closing cost expenses include:
A title examination is essential. When you buy property – whether it’s a new build or an existing home – you must confirm that you’re going to own it free and clear.
A title search examines historical records like deeds, court records and property indexes to ensure the seller has right to transfer ownership of the home. It also verifies that the property has no outstanding unpaid taxes, judgments, or lawsuits in progress.
Once the title search is complete, your lender will expect you to purchase title insurance policies for both you and your lender. If the title search overlooks something, title insurance acts as a second layer of defense so you aren’t responsible for any surprises. It’ll pay for all court costs and any fees related to title concerns.
This type of insurance is a one-time expense, and the policy is in effect until you sell the property.
Real Estate Transfer Tax
Whenever real estate changes hands, buyers and sellers need to account for a real estate transfer tax – or a documentary stamp tax, as it’s called in Nebraska.
The documentary stamp tax in Nebraska is $2.25 for every $1,000 of property value, with the potential for additional transfer taxes from local counties. You might also incur county transfer taxes or fees for recording the property’s change of hands at the municipal level.
Another checkpoint you’ll need to clear before your lender decides it’s safe to transfer your home loan is the appraisal.
Before closing, your lender will send a third-party appraiser to your new home to verify it’s priced at the right value. The appraiser will scan the home, its size, condition, and features to see how it stacks up to similarly priced homes in the community to determine its fair market value. If you default on your loan and your home ends up in foreclosure, your lender needs to know they can sell the property to make up for the outstanding balance.
Before you fork over your life’s savings, hire a home inspector who will scrutinize the condition of your potential new property from the foundation to the roof. This cost is worth every penny, as you are about to make the largest purchase of your life.
Your inspector will point out any issues that already exist or may surface in the coming years, such as needing to replace appliances or an impending leaky roof. This is great intel because you can ask the seller to make any fixes before finalizing the deal.
ClosingCorp says Florida and Texas are the only states in which land surveys are mandatory for single-family homes. But if you are in a situation where you’re buying large acres of land in Nebraska, it may be worthwhile to hire a surveyor to define property and boundary lines.
This step may even be a requirement from your lender before issuing your loan.
Closing costs include a handful of homeowner’s fees you’ll need to start paying annually. The trio of closing cost expenses below is prepaid, which means they must be purchased at closing and can’t be rolled into your home financing.
Home insurance is a mandatory purchase your lender will require you to buy and have in effect at closing before they fund your mortgage.
Homeowner’s insurance is crucial once you take ownership because it’ll cover any physical damage to your home caused by fire, wind, vandalism, or theft. It may be giving your lender peace of mind, but it should do the same for you, too! Make sure you stay on top of your coverage and make changes to your policy as needed.
Paying for property taxes is a rite of passage for first-time homebuyers. In Nebraska, homeowners pay an average of 1.65 percent of their property’s assessed market value – according to the Tax Foundation, a decades-old tax policy non-profit. The rate will vary because county taxes may be levied.
Property taxes are due each December and are paid to the county treasurer, according to the state.
About 15 percent of the state’s population lives in homeowners’ association communities in Nebraska. With these numbers, there’s a chance you’ll need to factor in prorated HOA dues at closing, too.
HOA fees can be worth their while – they cover the cost of clubhouses, pools, community parks, fitness centers, trash removal, security, and fire alarm systems. If your HOA has more bells and whistles, you should expect to pay even more.
If you’re eyeing a property, it’s fair game to ask about HOA fees upfront so you know what you’re getting in return for this cost. The onus is on you to keep up with payments according to the fee schedule.
How Can I Lower My Closing Costs in Nebraska?
If you’re wondering how you’ll come up with the cash to pay for closing costs, here’s some reprieve: there are many ways buyers can offset these costs, including via state and local homeownership programs. Here’s a look at key strategies that may help:
Closing Cost Assistance
Making use of Nebraska’s homeownership assistance programs is the easiest way to make the biggest dent in how much you’ll pay in closing costs.
Start with the Nebraska Investment Finance Authority, or NIFA, which provides a handful of statewide programs to support first-time and repeat homebuyers.
There’s a Homebuyer Assistance Program up for grabs, for example, which provides up to five percent of the home’s purchase price (not to exceed $10,000) in the form of a second mortgage set at one percent to help with the down payment and closing costs.
Choose your service providers wisely, whether you’re shopping for a title company, inspector, insurance provider, or surveyor. Read reviews from previous customers, ensure they are appropriately accredited, and then look at price points and obtain quotes so you know you’re getting the best deal.
Improve Your Credit Score
Getting your financial health, especially your credit score, in great shape could save you thousands of dollars in interest over the term of your mortgage.
Show lenders you’re a low-risk borrower worthy of a competitive interest rate. Pay down your debts, steer away from late or missed payments, and don’t apply for too much credit before making your case to lenders.
Save as close as possible to the 20 percent down payment threshold, too. This way, you’ll pay less in PMI.
With no hard and fast rules on who pays for what, there is always wiggle room when you’re dealing with your seller – unless you’re in a seller’s market!
It’s common to negotiate with sellers on who pays for what. If your home purchase is a fixer-upper, you can ask the seller to cover portions of your closing costs so you can pay for repairs. If you’re buying a new home but need to pay for upgrades, you may be able to work out a deal with your builder to pay closing costs.
When you receive your paperwork, carefully read the lender’s Closing Disclosure to grasp what fees and services you are asked to pay.
If you have an established relationship with your lender and your accounts are all in good order, you could ask them to omit certain expenses from the final bill, such as rate lock fees, loan processing fees, or broker rebates.
Some homebuyers can opt into a “no-closing-cost” mortgage as a strategy to keep this expense at a minimum. With “no-closing-cost” mortgages, your lender agrees to pay for part or all your closing costs, but you, in turn, pay a higher interest rate.
In the long run, this could cost you more money because of the bump in your interest rate but for some homeowners, it may be their best choice.
Adding Closing Costs to Your Home Financing
If you don’t have the upfront cash to cover your closing costs, you may be able to roll this into your home loan. This means you’re off the hook for paying for these expenses on closing day, but you’ll make up for it via monthly mortgage payments that will be a bit higher. Ultimately, you’re also paying interest on the closing costs tacked onto your first mortgage.
Other Nebraska Resources
Carmen Chai is an award-winning Canadian journalist who has lived and reported from major cities such as Vancouver, Toronto, London and Paris. For NewHomeSource, Carmen covers a variety of topics, including insurance, mortgages, and more.