A booming tourism industry, endless sunshine, and some of the lowest taxes in the country with plenty of housing options – welcome to Nevada. If you’re a homebuyer ready to call Nevada home, make sure you’re saving up a hefty sum to cover closing costs.
Closing costs are another crucial expense, paid for alongside your down payment on closing day. In a nutshell, they encompass all the fees involved in the final stages of your home purchase. In Nevada, that may involve your lender’s origination fees to set up your home loan to paying for an appraisal, home inspection, homeowner’s insurance, and property taxes. Instead of paying for each cost one-by-one, these expenses are grouped together and labeled as closing costs. And they add up quickly, amounting to two to five percent of your home’s purchase price.
If you’re buying a new home in Nevada, 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 these costs.
How Much are Closing Costs in Nevada?
Closing costs in Nevada run, on average, $2,915 for a home priced at $293,614, according to a 2021 report by ClosingCorp, which provides research on the U.S. real estate industry. That number makes up 0.99 percent of the home’s price tag.
Closing costs in Nevada aren’t cheap – the Silver State ranks 15th for the most expensive across the nation. For comparison’s sake, Missouri has the country’s cheapest closing costs at just $1,290 while New York has the most expensive at $8,256. The national average is $6,087.
But homebuyers in Nevada should count on spending more than ClosingCorp’s initial estimate. That’s because its data excludes key expenses such as loan origination fees (if you’re taking out a mortgage) and private mortgage insurance (if you’re not applying a 20 percent down payment). Both these costs add thousands to your closing costs bill.
Closing costs can fluctuate depending on the price of the home and the complexity of the sale. And keep in mind that home values have increased in Nevada: As of October 2021, the average sale price for single-family homes in the Las Vegas, for example, sat at $497,670, up 7.33 percent from the year before, according to research from the Lied Center for Real Estate at the University of Nevada. Across the board, the Center found home prices increased from Carson City to Washoe County, Las Vegas and Boulder City.
What’s Typically Included in Nevada’s Closing Costs?
There is a lengthy list of expenses, so it’s easier to group closing costs into three categories: mortgage-related fees, property-related fees, and annual recurring fees.
Here’s a closer look at the more common charges you’ll encounter in Nevada, including the state-specific details:
Typically, 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
If you need a mortgage, loan origination fees are one of the first closing cost expenses you’ll incur. This is what your lender will charge to set up your loan application, from underwriting and providing preapproval letters for house hunting, to funding.
Count on loan origination fees of about 0.5 percent to 1 percent of your loan.
Credit Report Fee
Before your lender decides you’re a responsible borrower, they’ll need to pull your credit score to have a clear snapshot of how you manage debt. Expect your lender to pass on this cost to you. If more than one borrower is on the mortgage application, you’ll need to double this cost.
Private Mortgage Insurance
If you aren’t providing a 20 percent down payment, your lender will expect you to buy private mortgage insurance. PMI allows borrowers to qualify for a conventional loan even if they put down five percent to 19.99 percent of their mortgage. While you’re responsible for paying for the insurance, the coverage is for your lender in case of loan default.
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.
While it isn’t a mandatory clause in Nevada, you may decide to hire a real estate attorney to help manage legal aspects of your closing. An attorney can help with legal documents, such as drafting your purchase agreement, certifying deeds, reviewing your title search, and choosing iron-clad insurance policies.
Your real estate agent may even recommend that you recruit a lawyer if your home purchase is complex, such as if you’re buying from out of state, the property has physical damage or you’re buying a foreclosed home.
In Nevada, title companies and escrow agents typically conduct closings. You may decide to enlist their help to make sure you close on time without any delays.
The title company will set up a neutral third-party escrow account to hold onto your funds, such as your earnest money deposit and payment for property taxes, insurance policies and other services. With this arrangement, the seller won’t receive any funds until both parties have met all the conditions for the home sale.
The title company will also guide you through the checklist of things you need to have completed by closing. It’s customary in Nevada to split this cost between buyer and seller.
From the title search to the appraisal, these property-related fees are pivotal checkpoints in the homebuying process that you’ll need to clear before proceeding. These closing cost expenses include:
Title Search and Title Insurance
A successful title search is a pivotal moment in the closing process. For this step, you’ll need to pay a title search abstractor to conduct a thorough search on your potential new home to verify the seller’s right to transfer ownership to you. Their job is to make sure the land you’re buying has no outstanding ownership disputes, unpaid taxes, judgments, or lawsuits.
Once the title search is complete, you’ll need to cover your bases with title insurance policies for both you and your lender. Title insurance protects both parties in case something is overlooked during the title search and there are “title defects” or claims to your property that were missed.
While most insurance policies are paid annually, title insurance is paid just once at closing, and it can’t be transferred over to the next buyer.
In Nevada, buyers typically pay for the lender’s title insurance policy while sellers pay for the owner’s (the buyer’s) policy.
Your lender will order an appraisal to make sure your potential new home is priced at the right value. This is a crucial step – they need to know that if you default on your mortgage, they can sell the property to make up for the outstanding balance.
The appraiser will evaluate the home’s size, features, and condition, as well as how it stacks up to homes priced similarly in the community, to determine its fair market value. While your lender delegates this step, you’re on the hook for the bill.
While an appraiser estimates the property’s market value, a professional home inspector’s job is to check on the health and safety of your potential new home from the foundation to the roof and everything in between.
You’ll want to pay attention to this feedback before you make the biggest purchase of your life. 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 repair 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
Whenever real estate changes hands, buyers and sellers need to account for a real estate transfer tax as part of their closing costs. It may be called a deed tax, mortgage registry tax or documentary stamp tax.
Transfer taxes are $1.95 for every $500 of property value over $100, according to Nevada’s Department of Taxation. You must factor in $0.10 more for Washoe and Churchill Counties and $0.60 for Clark County.
Keep in mind there are significant tax exemptions: if you’re transferring property to an immediate family member, there are no tax implications. Real estate transfers stemming from divorce or death also aren’t taxable.
Closing costs include a handful of homeowner’s fees you’ll need to start paying annually. The trio of expenses below is prepaid, which means they must be purchased at closing and can’t be rolled into your home financing.
In Nevada, homeowners pay an average of 0.65 percent of their property’s assessed market value, according to the Tax Foundation, a decades-old tax policy non-profit. For a $250,000 home, for example, you’d be on the hook for $1,625. Keep in mind, the tax rate will fluctuate depending on the county of residence and the taxes they may levy. The state provides guidance on county property taxes.
Property taxes are payable in four installments, with the first one due at the start of August, followed by October, January, and March. Make sure you mark due dates on your calendar.
Before closing, homebuyers must obtain and pay for a robust homeowner’s insurance policy for the upcoming year. This is mandatory before the lender transfers funds.
Home insurance is crucial to have in effect when you take ownership because it covers 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. Be sure to stay on top of your coverage and make changes to your policy as needed.
About 57 percent of Nevada’s population lives in homeowners’ association communities. There’s a good chance you’ll need to factor in prorated HOA dues at closing, too.
HOA fees 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 interested in a property, it’s fair game to ask about HOA fees upfront so you know what you’re getting in return. The onus is on you to keep up with payments according to the fee schedule.
How Can I Lower My Closing Costs in Nevada?
If you’re looking for ways to offset closing costs, here’s a rundown of key strategies you can try:
Closing Cost Assistance
Making use of statewide homeownership assistance programs in Nevada is the single most efficient way to make the biggest reduction in your closing costs bill.
In the Silver State, the Nevada Housing Division operates a slate of assistance programs nicknamed the “home of free money” to help low- and middle-income homebuyers who need the financial boost. Its flagship program, Home Is Possible, for example, offers 30-year fixed-rate mortgages set below market interest rates. You may be eligible to receive up to five percent of your loan value in “bonus money” to help with your down payment and closing costs.
The Nevada Rural Housing Authority has a similar program too, providing 30-year fixed-rate mortgages with down payment and closing cost assistance in the form of a three-year second mortgage. This can be completely forgiven if your home has been your primary residence for the first three years. That means you could receive up to five percent of your home’s purchase price – to a maximum of $25,000 – for free.
Check out local homeownership assistance programs, too – from Gardnerville to Henderson and Las Vegas; they’re readily up for grabs for eligible homebuyers.
Get Your Credit Score and Finances in Shape
A key strategy before you start shopping for a home loan is to get your credit score in great shape. With a high score, you could secure a lower interest rate, saving you thousands of dollars over the lifetime of your mortgage.
Save as much as possible for your down payment. The closer you get to the 20 percent down payment threshold, the less you’ll have to pay in PMI.
Whether you’re shopping for a title company, home inspector or mortgage provider, shop around and compare prices. Read reviews, check out referrals from friends and family, and look at providers’ accreditations. With a shortlist in hand, obtain quotes from a few providers to make sure you’re getting the best deal.
Don’t shy away from negotiating who pays for what with your seller, especially if you’re in a buyer’s market where the seller is eager to make the sale.
You may be able to reassign some of the closing costs to the seller. For example, you could ask the seller to pay for some — or all — of your closing costs if you submit a full price offer. If you’re building a new construction home, you could ask your builder to pick up your closing costs tab in exchange for paying for certain home upgrades.
With a “no-closing-cost” mortgage, your lender agrees to pay for part, or all, of your closing costs. The trade off? You must 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. This way, instead of paying for their closing costs at once, the total is added to the monthly mortgage payments. While this is a convenient way around paying for closing costs upfront, you will pay interest on this amount across the life of the loan.
This option isn’t necessarily available to all homebuyers. You’ll need to check with your lender to see if they can accommodate this arrangement.
Other Nevada 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.