You’ve saved for a down payment, secured a competitive interest rate for a mortgage, and you’re ready to buy a home in New Hampshire. But there’s one more checkpoint you’ll need to clear: closing costs.
In a nutshell, closing costs are all the administrative and legal fees you’ll need to pay before you receive the keys to your new home. It takes a village to buy property – you’ll need to pay your lender, appraiser, home inspector, attorney, insurance provider, and the taxman as prime examples. Typically, closing costs amount to about two percent to five percent of a home’s purchase price, paid for alongside the down payment on closing day.
If you’re buying a new home in New Hampshire, NewHomeSource has put together the following guide to help you determine how much you should be saving for closing costs, state-specific rules, and how you can potentially lower these costs.
How Much are Closing Costs in New Hampshire?
Closing costs in New Hampshire run, on average, $2,183 for a home loan of $250,888, according to a 2021 report by ClosingCorp, which provides research on the U.S. real estate industry. That price tag makes up 0.87 percent of the home’s price tag.
New Hampshire is in the middle of the pack, ranking 30th with the most expensive closing costs. For comparison’s sake, the national average for closing costs is $6,087.
But homebuyers in the Granite State should expect to spend far more than these estimates. ClosingCorp excluded two major closing cost expenses – loan origination fees and private mortgage insurance – or PMI, which homebuyers must take out if their down payment is less than 20 percent. Both expenses can add thousands of dollars to closing costs. Homebuyers in New Hampshire may also need to pay for extra home insurance premiums to cover flooding or winter storm damage.
Home values have risen, driving up closing costs, too. As of November 2021, the average sale price for single-family homes was $401,000, up 13.6 percent from the year before, according to the New Hampshire Association of Realtors.
Keep in mind, though, that closing costs will fluctuate greatly depending on a handful of factors, such as the price and location of the home, your down payment, your credit score, and the type of mortgage.
What’s Typically Included in New Hampshire’s Closing Costs?
Each state has its own set of rules when it comes to real estate closings, from hiring an attorney to paying for real estate transfer taxes. And with so many moving parts, it’s easier to group your expenses into three fee categories.
Here’s what to expect in New Hampshire:
Unless you have the cold hard cash to buy a home, your first stop in the homebuying process will be to a lender to secure a mortgage. The following are the closing cost fees you’ll incur, including the protocol for hiring an attorney:
Loan Origination Fees
Count on incurring loan origination fees of about 0.5 percent to 1 percent of your total loan. Your lender charges you these fees for all the administrative work involved in setting up your home loan, from the underwrite to producing preapproval letters for your house hunting, to processing your funding at closing.
Credit Report Fees
Just like when you apply for a credit card or personal loan, your lender will need to pull your credit history with the various bureaus to see how you’ve managed previous debts. Expect the lender to pass along this expense to you. If more than one borrower is on the loan application, 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. This allows borrowers to qualify for a conventional loan even if they put down only five to 19.99 percent. While you’re paying for the insurance, the coverage is for your lender in case of default.
PMI typically ranges from 0.25 percent to 2.25 percent of your loan. Once you hit the 20 percent mark in home equity, you don’t have to pay for PMI.
New Hampshire is one of several states that requires homebuyers to hire a real estate attorney for closing. The attorney will take care of any legal aspects, from drafting your purchase agreement and contract of sale to making sure you have adequate insurance policies. They’ll also be present on closing day to manage the deed transfer.
Legal fees will vary, depending on the complexity of the sale. Some attorneys bill by the hour while others may charge a retainer fee.
Before you trade in your life’s savings to make the single biggest purchase of your life, the property you’re buying will need to clear some hurdles. Common property-related fees include:
Title Search and Title Insurance
Whether you’re buying a brand-new home or a resale property, homebuyers must pay for a title examination to ensure they’re buying property that’s free of ownership disputes, unpaid taxes, judgments, or outstanding lawsuits.
During a title search, an examiner pores over historical records, such as deeds, court records and property and name indexes. Once the title search is complete, you’ll need to buy an owner’s title insurance policy for yourself and a lender’s title insurance policy for your lender. This insurance is a one-time expense that stays in effect until you sell your property and protects both parties in case of “defects in title.” It’ll cover all court costs and related fees should something go awry.
In New Hampshire, buyers are typically on the hook for all title-related fees. This rule isn’t set in stone, though – you may end up shifting this expense during negotiations with the seller.
Real Estate Transfer Tax
Whenever real estate changes hands, buyers and sellers need to account for a transfer tax during closing. In the Granite State, both buyers and sellers are accountable for this tax, with each party paying $0.75 for every $100 of property value, or $1.50 combined.
Keep in mind, there are key exemptions: Real estate transfers stemming from divorce or death in the family, for example, aren’t taxed.
Your municipal recording office may charge a fee for recording the transfer of the deed in public records.
The property appraisal is a make-or-break step in your homebuying journey – your lender needs to verify that your potential new home is priced at the right market value. That way, if you default on your loan, your lender may be able to recoup any losses.
The lender will send a third-party appraiser to the property to scan the home, its size, features, and condition. They’ll also compare how the property stacks up next to similarly priced homes in the neighborhood.
Ask your lender how much you should expect to pay for the appraisal.
For your peace of mind, hire a home inspector who will thoroughly examine the property you’re about to buy. A home inspector’s job is to check on the home’s condition inside and out, from the roof to the foundation to the drainage systems and heating and ventilation. They’ll also check on the health of major appliances.
This step is worth every penny. Your home inspector will flag any issues you may want to negotiate on with the seller before finalizing the deal. You can shop around for a home inspector so price points will vary.
From managing your mortgage to staying on top of utility bills, and seasonal maintenance, making a house your home takes work! Your closing costs will include a handful of fees that you’ll need to start paying annually:
In New Hampshire, homeowners pay about 2.03 percent of their home’s assessed market value in property taxes, according to the Tax Foundation. Because property taxes are collected on a county level, with each region setting its own tax rate, the precise percentage will vary. Overall, New Hampshire has one of the most expensive median property taxes in the country.
Property taxes are a prepaid expense, meaning they need to be paid at closing and can’t be rolled into your home financing. As part of your closing costs, you’ll need to pay for the first six to 12 months.
Each town bills homeowners for property taxes according to their region’s schedule. Your taxes could be due annually, semi-annually, or quarterly. Check with your town or county and mark due dates on your calendar.
Before your lender issues your loan, you’ll need to buy a homeowner’s insurance policy that’s in effect at closing and will cover the first year. Homeowner’s insurance is mandatory. It’ll cover any physical damage to your home caused by fire, wind, vandalism, or theft.
Check on whether you’ll need additional winter weather and flood insurance policies to safeguard your home. In some instances, you may even need to purchase a flood certification, which will categorize your home’s flood risk and insurance requirements.
Nearly 50 percent of homeowners in New Hampshire are part of a homeowner’s association (HOA). Based on these stats, there’s a good chance you’ll be on the hook for this expense.
HOA fees typically cover the cost of community amenities, such as fitness centers, pools, and community parks. They also may cover expenses to keep your neighborhood running, from trash removal to security.
The more elaborate your HOA is, the more you should expect to pay. Be sure to ask about HOA fees upfront.
How Can I Lower My Closing Costs in New Hampshire?
If the sticker shock is setting in, here’s a rundown of key strategies that could help you save some money:
Closing Cost Assistance
Take advantage of New Hampshire’s homeownership assistance programs as it could put a significant dent in your closing costs.
From statewide homeownership programs for first-time and repeat homebuyers to local programs organized by cities, from Manchester to Portsmouth, there are plenty of options worth investigating.
Get Your Finances in Shape
Get your credit score as high as you can before shopping for a home loan. With a perfect credit score in tow, you’ll be able to secure a lower interest rate and competitive terms for your loan. This move could save you thousands of dollars over the lifetime of your mortgage.
Apply as much as you can toward your down payment, too. The closer you get to the 20 percent threshold, the less you’ll have to pay in PMI.
While some closing cost fees are fixed, such as the appraisal and property taxes, you can shop around for some services, such as your lender, home inspector, and title company.
Take time to compare vendors, ensuring they’re appropriately accredited with glowing reviews from previous customers. With a shortlist in hand, ask for quotes so you can make sure you’re getting the best deal.
Negotiate Lender Fees
If you have a longstanding, established relationship with your lender, you may have some wiggle room with your loan setup fees.
You could ask your lender to omit certain expenses from your bill, such as rate lock fees, loan processing fees or broker rebates. If that doesn’t work, you could also ask to stagger these expenses, so they’re paid in stages instead of all at once at closing.
Don’t shy away from negotiating on who pays for which closing cost expenses with the seller, especially if you’re in a buyer’s market.
Try to reassign some of the closing costs. For example, you can submit a full-price offer with a caveat that the seller must pick up all your closing costs. If you’re building a new home, you could ask the builder to cover your closing costs in exchange for paying for a handful of pricy upgrades.
With a “no-closing-cost” mortgage, your lender agrees to pay for part or all of your closing costs, but you must pay a higher interest rate.
Be careful with this option: It could cost you more money overall because of the bump in your interest rate.
Add Closing Costs to Your Home Financing
Aside from the prepaid expenses that must be paid at closing, you could opt to roll your closing costs into your home loan. This could add thousands of dollars to your mortgage. You won’t have to pay for closing costs on closing day, but your monthly mortgage payments will be a bit higher.
Other New Hampshire 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.