Everything you wanted to know about home buyer closing costs in Missouri

Real Estate | 8 Jul |

You don’t buy homes in Missouri every day, so it’s a no-brainer that you will want to find out how much you need to budget for it. It’s a good idea to know what to expect since closing costs can add up to thousands of dollars for a home purchase.

According to the real estate agents in Missouri, closing costs for the Show-Me State home buyers tend to range from 2 to 5% of the purchase price. While it’s a common belief that closing costs are a seller’s expense, the truth is that buyers also have to pay their own closing costs. In this article, you’ll find out everything you need to know about Missouri closing costs.

What are closing costs?

Before diving deeper, let’s start with a basic definition to ensure we’re on the same page. Closing costs refer to charges involved in a real estate transaction. Most of them are paid at the closing when the property title is transferred from seller to buyer.

Usually, the seller covers a part of closing costs, while the buyer pays the rest. But it is really all negotiable. For example, a buyer can ask a seller to contribute toward the buyer’s closing costs, or the parties can pay their own closing costs.

Importantly, it’s a mistake to think that only the buyer, the seller, the real estate agents, and the mortgage company are involved in buying a home. In practice, many other people can also charge fees for their services, feeding into the closing costs. These can be fees associated with property taxes, credit reports, title search, title insurance, mortgage insurance document preparation, and legal services.

Closing costs in Missouri

Missouri is home to the nation’s lowest closing costs, at an average of $1,290 for property priced at $177,915, according to a 2021 report by ClosingCorp. In Missouri, it’s typical for buyers to pay approximately 0.52% to 0.79% of the final home sale price. However, these figures can vary depending on a range of circumstances, such as the property’s price and the sale’s complexity.

While you aren’t likely to spend a fortune on Missouri closing costs, as a homebuyer, you should expect to pay more than the initial estimate. Keep in mind that ClosingCorp’s data doesn’t include common closing costs expenses, for example, loan origination fees and private mortgage insurance for homebuyers who put down less than 20%. In reality, these fees can add plenty of dollars to your closing costs.

What do Missouri closing costs typically involve?

Let’s explore some most common closing costs you can face in Missouri.

Mortgage-related fees

Loan origination fees. These fees are for preparing your mortgage, averaging between 0.5 and 1% of your total loan amount.

Credit report fees. These are fees you’ll need to pay for checking your credit report.

PMI (private mortgage insurance). It’s required to pay PMI (0.25-2.25% of your outstanding loan balance) unless you provide a 20% down payment. PMI safeguards the lender in the event you fail to pay your loan. As soon as you pass the 20% point in home equity, you won’t need to carry PMI.

Attorney fees. Although it isn’t compulsory in Missouri, you might want to hire an attorney to assist you with drafting your purchase agreement, certifying deeds, and reviewing your home insurance and title insurance policies. The cost of hiring an attorney can considerably vary depending on your unique case.

Escrow account fees. Buyers pay these fees to the title company or escrow company to set up an escrow account for their earnest money.

Property-related fees

Title search. Ranging from $75 to $200 in Missouri, the title examination is a worthwhile investment. It confirms whether the title to the property is free from other claims to ownership, unpaid taxes, etc., and helps the buyer avoid any ownership disputes in the future.

Property appraisal. Before the lender transfers funds for home purchase, a third-party appraiser will arrive at the property to ensure that it’s appropriately priced.

Property inspection. You might want to hire a home inspector to check the condition of the property you’re about to buy.

Annual fees

Property taxes. Missouri boasts one of the lowest property tax rates in the US — 0.99%.

Homeowner’s insurance. At closing, you are required to pay for the first year of coverage for your homeowner’s insurance policy.

Homeowner Association fees. Nearly 20% of homeowners in Missouri belong to the Homeowner Association (HOA).

Parting thoughts

The good news is that it’s pretty achievable to reduce your closing costs when buying a home in the Show-Me State. A homebuyer can share the costs with the seller during the negotiation phase. You can always turn to an experienced real estate agent in Kansas City to help you secure a favorable agreement.

You might qualify for homeownership assistance programs that can help you reduce closing costs. You can save on closing costs if you close at month’s end. The thing is that certain charges are calculated on closing costs if you close at month’s end. It’s calculated daily, meaning the amount due at closing will be smaller.

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