What Are the Closing Costs in Missouri?
Navigate real estate transactions in Missouri with clarity. Understand all the closing costs involved, whether you're buying or selling a home.
Beyond the property’s purchase price, real estate transactions involve additional financial obligations known as closing costs. These fees and charges are paid at the culmination of a real estate deal. These costs are a standard part of transferring property ownership and securing financing.
Understanding Closing Costs
Closing costs encompass fees and expenses incurred by both buyers and sellers to finalize a real estate transaction. These charges cover services provided by various professionals, such as lenders, title companies, appraisers, and attorneys. Their purpose is to ensure the legal and financial transfer of property ownership is completed accurately and efficiently.
These expenses can vary significantly based on the property’s location, the type of loan, and the specific details negotiated. While both parties typically contribute, the distribution of these costs often varies, with buyers usually shouldering the majority of lender-related fees.
Buyer’s Closing Costs
In Missouri, buyers typically incur closing costs ranging from 2% to 5% of the home’s purchase price. These expenses cover various services essential for securing the property and its financing.
A significant portion of buyer costs includes lender-related fees, such as loan origination fees, which lenders charge for processing the mortgage application and underwriting the loan. This fee commonly ranges from 0.5% to 1% of the loan amount. Buyers also typically pay an appraisal fee, usually between $300 and $500, to ensure the home’s value supports the loan amount. A credit report fee, a smaller expense, is also charged to obtain the buyer’s credit history.
Title-related expenses are another component, with the buyer generally paying for the lender’s title insurance policy in Missouri. This policy protects the lender’s financial interest in the property in case of title defects. Recording fees are also paid by the buyer to officially document the deed and mortgage with the local government.
Additional costs for buyers can include survey fees, which confirm property boundaries, and attorney fees if legal representation is sought or required. Buyers may also be required to prepay certain expenses, such as a portion of property taxes and the initial year’s homeowner’s insurance premium, which are often held in an escrow account. If a down payment is less than 20%, private mortgage insurance (PMI) is usually required, adding to monthly housing costs.
Seller’s Closing Costs
Sellers in Missouri also bear a share of closing costs, which tend to be higher than buyer costs, often ranging from 6.25% to 10% of the home’s sale price. A substantial portion of these expenses comes from real estate agent commissions, typically between 5% and 6% of the sale price, covering both the listing and buyer’s agents. This commission is usually the largest single closing cost for sellers.
In Missouri, the seller typically pays for the new owner’s title insurance policy, which protects the buyer from potential title issues after the sale. However, this specific cost can be subject to negotiation between the buyer and seller. Prorated property taxes are another common seller expense, where the seller pays taxes covering the period they owned the home up to the closing date.
Sellers are responsible for paying off any outstanding mortgage balance on the property, including any prepayment penalties if applicable. Recording fees for releasing liens on the property are also a seller’s expense. Missouri does not impose a state-level real estate transfer tax, which can provide some financial relief compared to other states.
Other potential seller costs can include attorney fees, if legal counsel is engaged, or the cost of a home inspection if the seller opts to complete one prior to listing. Sometimes, sellers may also agree to cover a home warranty for the buyer as part of the sales agreement.
Estimating and Finalizing Closing Costs
The process of estimating and finalizing closing costs is governed by federal regulations designed for consumer transparency. The TILA-RESPA Integrated Disclosure (TRID) Rule, implemented by the Consumer Financial Protection Bureau (CFPB), requires lenders to provide specific documents to borrowers. These documents standardize the disclosure of loan terms and costs.
The first key document is the Loan Estimate (LE), a three-page form that lenders must provide to borrowers within three business days of receiving a mortgage application. The LE outlines estimated interest rates, monthly payments, and an itemized list of projected closing costs, allowing borrowers to compare offers from different lenders. While an estimate, it provides a clear snapshot of anticipated expenses.
Closer to the closing date, typically at least three business days before the scheduled closing, borrowers receive the Closing Disclosure (CD). This five-page document provides the final, detailed breakdown of all loan terms and closing costs for both the buyer and seller. It is imperative to review the CD carefully and compare it against the initial Loan Estimate to identify any significant discrepancies or unexpected fees.
The three-day review period for the Closing Disclosure is intended to give borrowers sufficient time to understand all financial aspects before signing the final loan documents. Once all parties agree to the terms outlined in the CD, funds are disbursed, and the ownership of the property is officially transferred.