Understanding Closing Costs: What to Expect at Your Home Purchase
What Are Closing Costs?
Closing costs are the fees and expenses you’ll incur when finalizing the purchase of a home. These costs are in addition to your down payment and cover services such as paperwork, legal fees, inspections, and insurance.
Total Closing Costs: Typically range from 2% to 5% of the home’s purchase price.
Who Pays What: Buyers usually cover most costs, but sellers may contribute depending on the agreement.
Common Closing Costs for Buyers
- Loan Origination Fees: 0.5% to 1% of the loan amount.
- Appraisal Fees: $300 to $600.
- Inspection Fees: $300 to $500.
- Title Insurance: Around $1,000.
- Property Taxes: A portion due at closing.
- Homeowners Insurance: $500 to $1,500 for the first year.
- Recording Fees: Typically $100 to $250.
- Escrow Fees: If applicable.
How to Estimate Your Closing Costs
You can estimate closing costs in advance using:
- Closing Disclosure: Provided by your lender at least three days before closing.
- Loan Estimate: Given when applying for a mortgage.
- Online Calculators: Various tools can estimate costs based on location and price.
Can Closing Costs Be Negotiated?
Yes, some closing costs are negotiable. Consider:
- Negotiating with Lenders: Some may offer credits or reduced fees.
- Seller Contributions: Sellers may cover part of the costs in some cases.
- Title Insurance: Shopping around can reduce this cost.
How to Prepare for Closing Costs
To avoid financial surprises, follow these tips:
- Start saving early—set aside 2% to 5% of the home’s price.
- Include closing costs in your home-buying budget.
- Review the Loan Estimate and Closing Disclosure carefully.
Can Closing Costs Be Rolled Into Your Mortgage?
In some cases, lenders allow closing costs to be added to the mortgage, increasing your loan balance but reducing upfront costs.
