Closing costs are 2% to 5% of the total purchase price for Alabama buyers and 8% to 10% for Alabama sellers. The exact percentage varies based on certain factors such as mortgage type, home value, contingencies and local regulations. Typical buyer closing costs cover loan fees, third-party services, prepaid items, and recording charges. Seller closing costs mainly include agent commissions, taxes and legal fees for the transfer of ownership.
Key Takeaways
- Closing costs for buyers in Alabama range from 2% – 5% of the purchase price
- Sellers can expect to pay around 6% – 10% including real estate commissions
- Major closing costs include title fees, recording fees, transfer taxes and more
- Several factors like location and mortgage type impact closing costs
- Both buyers and sellers pay certain closing fees like title searches
- Steps like getting pre-approved can help prepare for closing costs
What are Closing Costs in Alabama
Closing costs refer to the various administrative fees and charges associated with finalizing a real estate transaction. When buying or selling a home in Alabama, both parties have to pay these fees to officially transfer ownership of the property.
These fees pay for processing and documenting the property sale, as well as all the legal work and paperwork involved. Closing costs are paid at the closing session where the buyer and seller sign all the documentation to complete the sale.
Also read: Closing Costs in Michigan: What Homebuyers Need to Know
Different Types of Closing Costs
Some common closing costs paid by buyers and sellers in Alabama include:
For Buyers
- Origination fees: Charged by the lender to process the mortgage loan
- Appraisal fee: For the appraiser who inspects and evaluates the property
- Credit report fee: For running the buyer’s credit check
- Title insurance: To cover legal issues that may arise with the title
- Recording fees: To officially record the deed with county records
For Sellers
- Broker’s commission: Paid to the seller’s real estate agent
- Title search fees: For researching documents to ensure clear title
- Document preparation fees: For creating all closing documents
- Recording fees: To record the ownership transfer
- Transfer taxes: Taxes paid when transferring property
Factors Influencing Closing Costs in Alabama
Closing costs can vary widely by transaction in Alabama. Some key factors that influence the total amount include:
- Property location: Closing costs vary by county based on local taxes and fees
- Purchase price: Higher priced homes have higher taxes and insurance costs
- Mortgage type: FHA and VA loans often require upfront mortgage insurance
- Lender fees: Each charges different loan origination/processing fees
- Title complications: Additional title work results in higher title fees
Making certain choices like opting for owner’s title insurance coverage and getting pre-approved with your lender can help lower overall closing costs.
Also read: Closing Costs in Missouri: Complete Guide
Who Pays Closing Costs in Alabama
In a traditional Alabama home purchase, buyers typically pay around 2% to 5% of the total purchase price in closing costs, while sellers pay between 8% to 10%.
However, the purchase agreement determines the exact split, so it’s possible to negotiate who pays specific fees. Many sellers pay for portions or all of a buyer’s closing costs as part of home sale incentives.
Who Pays Closing Costs on FSBO in Alabama
With For-Sale-by-Owner (FSBO) home sales, the seller won’t be working with a real estate agent and saving on the traditional agent commission. However, FSBO sellers typically cover many buyer closing costs themselves that a buyer’s agent may have covered, such as:
- Owner’s title insurance policy
- Document preparation/attorney fees
- Recording fees
- Transfer taxes
FSBO sellers may offer to credit the buyer a portion of expected agency commission savings to balance out this shift in fee responsibility.
Also read: Closing Costs in Indiana: What to Expect When You Buy a Home
How Much are Closing Costs in Alabama
On average, total closing costs in Alabama range from 2% to 5% for buyers and about 8% to 10% for sellers. This translates to a range of $4,500 to $11,000 for the median home price in the state, which is $215,294.
Typical closing costs breakdown as:
| HOME PRICE | BUYER CLOSING COSTS | SELLER CLOSING COSTS |
|---|---|---|
| $100,000 | $2,000.00 – $5,000.00 | $8,000.00 – $10,000.00 |
| $200,000 | $4,000.00 – $10,000.00 | $16,000.00 – $20,000.00 |
| $300,000 | $6,000.00 – $15,000.00 | $24,000.00 – $30,000.00 |
| $400,000 | $8,000.00 – $20,000.00 | $32,000.00 – $40,000.00 |
| $500,000 | $10,000.00 – $25,000.00 | $40,000.00 – $50,000.00 |
| $750,000 | $15,000.00 – $37,500.00 | $60,000.00 – $75,000.00 |
| $1,000,000 | $20,000.00 – $50,000.00 | $80,000.00 – $100,000.00 |
How Much are Closing Costs for Buyers in Alabama
In Alabama, expect to pay between 2% and 5% of the purchase price for closing costs as a buyer. This translates to a range of $4,500 to $11,000 for the median home price in the state, which is $215,294. However, the exact amount can vary depending on several factors, including:
- Loan type: Different loans (conventional, FHA, VA, USDA) have various associated fees.
- Home value: Closing costs are typically a percentage of the purchase price, so a higher-priced home will have higher closing costs.
- Location: Local fees and taxes can differ across counties and cities.
- Negotiation: You might be able to negotiate with the seller to cover some closing costs.
How Much are Closing Costs for Seller in Alabama
Closing costs for sellers in Alabama are generally higher compared to buyers, typically ranging from 8% to 10% of the final sale price, excluding the mortgage payoff. This translates to $22,624 to $28,280 for the current median home value of $282,800 in Alabama.
Here’s a breakdown of the main components:
- Agent commissions: This is the biggest cost, typically ranging from 5% to 6% of the sale price and split between the listing and buyer’s agent, negotiated in advance.
- Title and closing fees: This covers the title search, title insurance, and closing services, and can amount to around 1% of the sale price.
- Other costs: These can include prorated property taxes, recording fees, homeowner association (HOA) fees, and other miscellaneous closing charges, usually totaling around 2% to 4% of the sale price.
How are Closing Costs Calculated
Closing costs are calculated from the home sale price, mortgage loan amount, and pre-defined county/state fees that apply. The math breakdown is:
For Buyers
- Loan origination/processing fees based on mortgage amount
- Third-party fees based on services rendered
- Government charges based on state/county fee guidelines
For Sellers
- Commission percentages based on agent agreement
- Transfer tax rates based on property county
- Legal fees based on actual title work performed
Online closing cost calculators from lenders also help estimate expected buyer closing fees by inputting your specific transaction details. This gives an approximate figure to prepare for.
Steps to Prepare for Closing
Closing on a house is an exciting yet complex process. Here are some key steps to prepare for a smooth closing experience:
Before the closing
- Schedule a final walk-through: Visit the property shortly before closing to ensure everything is in the same condition as negotiated in the contract and that repairs have been completed as agreed upon.
- Review and understand the closing documents: Your lender will provide a Closing Disclosure outlining the final closing costs and loan terms. Read it carefully, ask questions about anything unclear, and bring it with you to the closing.
- Gather required documents: Prepare all necessary documents like proof of identification, homeowner’s insurance policy, and proof of funds for closing costs. Your lender and real estate agent will provide a complete list.
- Secure funding: Ensure you have the necessary funds to cover closing costs. This can be in the form of a cashier’s check, wire transfer, or funds readily available in your checking account.
- Arrange for utilities transfer: Contact utility companies to schedule the transfer of services into your name on the closing date.
- Hire a lawyer (optional): While not mandatory in all states, consulting a real estate lawyer can provide valuable guidance and ensure your interests are protected throughout the closing process.
On the closing day
- Arrive on time: Punctuality is crucial to avoid delays and ensure a smooth closing process.
- Be prepared to sign documents: Expect to sign various legal documents related to the sale and transfer of ownership.
- Ask questions: Don’t hesitate to ask questions about anything you don’t understand. Your lawyer, real estate agent, and loan officer are there to assist you.
- Review everything carefully: Take your time to review all documents before signing. Make sure all information is accurate and matches the agreed-upon terms.
Once everything is signed and funded, you will receive the keys to your new home!
Additional tips
- Communicate clearly: Maintain open communication with your real estate agent, lender, and lawyer throughout the process.
- Stay organized: Keep all important documents and paperwork in a safe and easily accessible location.
- Be patient and flexible: Closing timelines and details can sometimes shift, so remain patient and flexible throughout the process.
Closing Costs in Alabama for Refinance
When refinancing in Alabama, total closing costs generally range from 3% to 5% of the mortgage loan amount. Major refinancing closing costs typically include appraisal fees, credit check fees, loan origination charges, title searches, recording fees, and more. While closing costs are rolled into the new loan balance or paid upfront, it’s advisable to refinance only when current rates drop 0.5% to 0.75% below your existing rate to offset these expenses over the loan term. Carefully calculating the breakeven point on refinancing costs ensures the move is financially worthwhile vs. continuing current mortgage payments.
Ways to Reduce Closing Costs in Alabama
- Opt for owner’s title insurance coverage only
- Negotiate seller credits into the purchase contract
- Shop mortgage rates from multiple Alabama lenders
- List during lower-volume seasons to negotiate lower commissions
- Resolve title issues early to avoid higher legal fees
- Pay transfer taxes from proceeds vs. out-of-pocket if possible
How to Avoid Paying Closing Costs When Buying a House
It’s rare buyers avoid all closing costs but some ways to reduce them or transfer responsibility include:
- Secure seller closing cost concessions in the purchase contract
- Pay higher rate for lender-paid MI to tradeoff origination fees
- Split costs like title insurance charges with the seller
- Obtain gift funds or grants to allocate for payments
Even with concessions, buyers pay some third-party or prorated costs. But savvy negotiating and shopping can minimize overall outlays.
How to Find a Trusted Real Estate Agent
Vetting a trusted Alabama agent who can advise on optimizing closing costs includes:
- Get referrals from recent clients in nearby neighborhoods
- Check credentials & reviews for ratings, track record success
- Interview agents to assess understanding of local markets, costs
- Compare offerings like typical commission rates, buying incentives
- Choose transparency by asking upfront questions around cost expectations
Having an experienced agent in your corner informs decisions that balance purchase price, mortgage rates, and closing fees for maximum long-term savings.
Conclusion
In summary, closing costs are necessary fees to finalize real estate transactions in Alabama, averaging 2-5% for buyers and 8-10% for sellers. Being aware of common costs and strategically negotiating to reduce expenses where possible allows both parties to achieve the best deal. Working with trusted professionals can streamline the process so buyers and sellers stay focused on their housing goals while seamlessly handling the closing paperwork and payments.
Frequently Asked Questions (FAQ)
In Alabama, closing costs for buyers typically range between 2% and 5% of the purchase price, averaging around $4,500 to $11,000. Sellers face higher costs, typically 8% to 10% of the sale price, excluding the mortgage payoff, averaging around $22,624 to $28,280 for the current median home value. Remember, these are estimates, and the exact cost can vary depending on several factors.
In Alabama, buyer closing costs typically range from 2% to 5% of the purchase price while seller closing costs average 6% to 10%. For buyers, major fees include lender charges, appraisal, title work, and transfer taxes which often total several thousand dollars. Sellers primarily pay the real estate agent commission plus legal fees and taxes to transfer ownership, which can equal 6 to 10 percent of the sales price in Alabama.
Buyers traditionally pay most closing costs, which can include lender fees, appraisal fees, title charges, etc. Sellers primarily pay real estate agent commissions and local transfer taxes. Costs can be negotiated between buyers and sellers.
In Alabama property taxes are paid in arrears, so at closing the buyer typically pays a prorated amount to reimburse the seller for taxes owed up to the transfer date. Then the buyer owes future property tax bills.
While Washington D.C. boasts the highest average closing costs at $29,888, states like New York ($8,039), California ($8,028), and New Jersey ($7,702) also rank high due to factors like transfer taxes and local fees. Remember, closing costs are also influenced by the purchase price and specific circumstances.
No, buyers will generally not receive a refund on appraisal and credit report fees if financing fails, but other closing costs may be refunded depending on timing. Buyers can ask sellers to make loan approval a contingency.
Typically the buyer pays any mandatory homeowner’s association (HOA) transfer or capital contribution fees at closing in Alabama. The purchase contract determines exact allocation of HOA fees.
Average lender fees for mortgage closing costs for Alabama buyers fall between 1% to 1.5% of the total loan amount. This covers origination, underwriting, document preparation and more mortgage-related charges at closing.
Yes, eligible closing costs can be rolled into the mortgage loan amount through first mortgage financing or a “piggyback” second lien rather than paying out of pocket. However this increases total interest paid over the loan.
If the appraisal value is lower than the agreed Alabama home sale price, additional out of pocket funds may be needed from the buyer to cover the gap in order to still qualify for full financing. Renegotiation may also occur.
