Your Guide to Closing Costs in Utah

A thriving economy paired with natural landscapes and tons of outdoor recreational activities for families and adventure-seekers alike? It’s no surprise so many Americans are ready to call Utah home. But as you save for a down payment and the new furniture for your dream house, make sure you also budget for closing costs.

Closing costs are all the administrative and legal services you must pay before you receive the keys to your new home. Instead of paying each service provider one by one, these fees are all paid together on closing day alongside your down payment. All in, count on closing costs amounting to about 2 percent to 5 percent of a home’s purchase price.

If you’re buying a new home in Utah, NewHomeSource has put together the following guide on how much you should be saving for closing costs, a breakdown of what’s generally included, and how you can potentially lower this expense.

How Much Are Closing Costs in Utah?

Closing costs in Utah run, on average, $2,157 for an average home loan of $325,548, according to a 2021 report by ClosingCorp, which provides research on the U.S. real estate industry. Those figures put Utah somewhere in the middle of the pack, in the 19th spot among the 50 states for the least expensive closing costs. For comparison’s sake, the national average for closing costs is $6,087.

But homebuyers in Utah should plan on spending more than this initial estimate. That’s because ClosingCorp’s data excludes two major costs you’re bound to come across — loan origination fees, if you’re taking out a mortgage, and private mortgage insurance, if you have a down payment of less than 20 percent. Most people rely on both of these tools to help them get on the property ladder, but they can easily add thousands of dollars to your closing costs tab. 

Home prices have also crept up across the country and Utah is no exception: In 2021, the median price for a home was $442,200, up a staggering 24.6 percent from the year before, according to estimates. Higher price tags on property will drive up your closing costs from ClosingCorp’s estimates.

What’s Typically Included in Utah’s Closing Costs?

With so many moving parts, the easiest way to keep track of your closing costs is to group them into three fee categories: mortgage-related, property-related, and annual recurring expenses. 

Each state also has its own set of regulations you’ll need to follow, from real estate transfer taxes to hiring an attorney. Here’s what to expect in Utah.

Mortgage-Related Fees

If you’re applying for a home loan, the following are the closing cost fees you’ll incur, including the protocol for hiring an attorney.

Loan Origination Fees

Whether you’re working with a bank or a mortgage broker, one of the first expenses you’ll incur is a loan origination fee to set up your mortgage application. This expense covers everything from underwriting your loan to providing preapproval letters for your house hunting to processing your funding.

Loan origination fees are typically about 0.5 percent to 1 percent of the loan amount. 

Credit Report Fees

Lenders conduct a full credit check to make sure you’re a responsible borrower before they can offer you any type of credit, especially a home loan. Expect your lender to pass on the cost of requesting your credit report from the various credit reporting bureaus. Via these important documents, the lender will be able to look at how well you’ve managed debts over the past few years.

If more than one borrower is listed on the mortgage application, double this cost because lenders will request both applicants’ reports.

Private Mortgage Insurance

If you aren’t providing a 20 percent down payment, your lender will expect you to buy private mortgage insurance, or PMI. PMI allows borrowers to qualify for a conventional loan even if they put down 5 percent to 19.99 percent of their mortgage. The coverage protects your lender in case of loan default.

PMI typically ranges from 0.25 percent to 2.25 percent of your outstanding loan balance, depending on the size of your down payment and credit score.

Attorney Fees

While in some states it’s mandatory to hire a real estate attorney to manage your closing, this rule doesn’t apply to Utah. 

Some homebuyers may still decide to hire a lawyer, especially if the home purchase is complex. For example, if you’re buying a home from out of state, the property has physical damage, or you’re buying foreclosed property, your real estate agent or lender may insist you recruit the help of an attorney.

You can rely on your attorney to help with the legal aspects of your home purchase, such as drafting your purchase agreement, certifying deeds, and reviewing your title examination and title insurance policy. 

Escrow Fees

You may decide to hire a title company — or escrow agent — to ensure you get to closing day on time. The key job you’re trusting your title company with is setting up a third-party escrow account to hold your earnest money deposit, down payment, taxes, and other expenses. This way, the seller won’t receive any funds until both parties meet all their conditions on the sale and the contract is finalized. In Utah, lenders can handle this job, too.

Your title company will also walk you through the checklist of items you have to complete and keep you on track to a smooth closing. Buyers and sellers typically split the cost of escrow fees. 

Property-Related Fees

Before you can close on your new home, you’ll need to do your due diligence to make sure you’re buying a worthy investment. Here are some common property-related fees.

Title Search

Homebuyers must pay for a title search, which involves reviewing historical records like deeds, court records, property indexes, and other record-keeping. This step ensures the seller’s right to transfer ownership. This way, you don’t have to worry about buying a home only to inherit legal issues over ownership or other problems like unpaid taxes, judgments, or ongoing lawsuits. 

Homebuyers pay for this step whether they’re buying a brand-new build or an existing home.

Title Insurance

Once the title search is complete, you’ll need two title insurance policies — an owner’s policy for yourself and a lender’s policy. Title insurance protects both parties in case of “defects in title,” which is when something is missed during the title search or there are claims on the property. 

This is a one-time expense, so the insurance applies for as long as you’re the homeowner of the property. Usually, sellers pick up this cost in Utah, but this expense could fall into your lap during negotiations.

Appraisal

A key checkpoint your property must clear before your lender agrees to fund your home loan is the appraisal. In this case, your lender will send a third-party appraiser to your new home to make sure it’s priced at the right value. If you default on your mortgage, your lender needs to know they can sell the property if it goes into foreclosure to make up the outstanding balance. 

The appraiser’s job is to evaluate the home’s size and condition and compare how it stacks up to similarly priced homes in the community. While your lender calls the shots on the appraiser, you are billed for this expense.

Home Inspection

While the appraiser considers the market value of your new home, you should also hire a professional home inspector to evaluate the overall health and safety of the property. 

Your inspector will examine everything from the foundation to the roof and all the minute details in between.

Take note of your inspector’s feedback: They’ll point out any existing issues as well as ones that could surface in the coming years, such as needing to replace major appliances or an aging roof. This is great intel because you can negotiate with the seller regarding any fixes before finalizing the deal.

Real Estate Transfer Tax

Here’s a silver lining for homebuyers in Utah: no real estate transfer taxes! Also called a deed tax, a mortgage registry tax, or a documentary stamp tax, a real estate transfer tax is a one-time fee imposed by a local jurisdiction at the time of the property transfer, and in states that have this fee, it’s usually folded into the closing costs. 

Annual Fees

You’ve got your mortgage, utility bills, property taxes — homeownership is all about managing recurring expenses. Annual fees first appear with the following closing cost expenses.

Property Taxes

In Utah, property taxes are roughly 0.59 percent, on average, of a property’s assessed fair market value, according to the tax policy nonprofit, Tax Foundation. The rate will vary depending on the county where you live.

Property taxes are a prepaid expense, meaning it can’t be rolled into your home financing. You can read all about property tax details, including due dates, on the state’s Property Tax Division website.

Homeowners Insurance

Like private mortgage insurance and title insurance, homeowners insurance is another mandatory purchase you must make before your lender agrees to transfer your home loan. This is a prepaid expense, too. 

It’s crucial to have your homeowners insurance policy in effect by the time you take ownership because it covers any physical damage to your home caused by fire, wind, vandalism, or theft. 

You may need to buy additional policies if you have expensive art of family heirlooms you’ll keep in your home.

How Can I Lower My Closing Costs in Utah?

If you’re dealing with some sticker shock, you may be looking for ways to lower your closing costs. Here are some key strategies to consider as they may help you save thousands on your overall closing costs.

Closing Cost Assistance

Homebuyers should take advantage of Utah’s homeownership assistance programs to put a significant dent in their closing costs.

If you’re a first-time homebuyer, for example, start with the Utah Housing Corporation. It has several programs for low-interest mortgages, along with down payment and closing cost assistance programs for eligible homebuyers. Whether you’re a first-time homebuyer, a veteran, or a low-income household, there is cash for closing cost assistance available.

Look into regional homeownership programs, too. From Clearfield City and Davis County to Salt Lake City and more, there are local initiatives for eligible homebuyers.

Get Your Finances in Shape

Before you shop for a home loan, get your finances in order. This means paying off your debts, making payments on time on all your bills, and steering clear of applying for more credit.

Deploying this tactic will help you secure a lower interest rate because lenders will see you’re a responsible borrower. Ultimately, it could save you thousands of dollars in interest over the lifetime of your mortgage.

Save as much as you can for your down payment, too. The closer you get to the 20 percent down payment threshold, the less you’ll have to pay in PMI.

Comparison Shop

Do your homework and compare your options whether you’re shopping for a home loan, home inspector, or title company. When you shop around, get quotes from a few shortlisted service providers and ask for referrals from your real estate agent, family, and friends. 

Taking the extra time to comparison shop will help you secure the best deal for your specific needs.

Seller Concessions

During negotiations on the home sale, you may be able to reassign some of your closing costs to the seller, especially if you’re in a buyer’s market.

You could, for example, ask the seller to pay for some of your closing costs if you offer to submit a full price offer on their home. If you’re buying a fixer-upper, you could ask the seller to pick up your closing costs tab in exchange for the repairs you may need to make.

No-Closing-Cost Mortgages

With a “no-closing-cost” mortgage, your lender agrees to pay part or all of your closing costs while you pay a higher interest rate on your mortgage. Run some calculations before you decide that this is the best route for your bottom line. In the long run, this could cost you more money because of the bump in your interest rate.

Adding Closing Costs to Your Home Financing

Homebuyers who can’t come up with the cash for their closing costs may opt to roll this expense into their home loan. While this may be a convenient way around paying for closing costs upfront, you’ll pay interest across the life of the loan, so be sure this is an acceptable trade-off.