When you’re budgeting for your home, the down payment isn’t the only big number to plan for. Closing costs can add thousands of dollars to your final price.
Let’s break down what closing costs are, what they include, and how you can plan ahead.
1. What Are Closing Costs?
Closing costs are the various fees and expenses paid when finalizing a home purchase. They are separate from your down payment and are typically due at the time of closing.
They usually range from 2% to 5% of your home’s purchase price.
2. Common Buyer Closing Costs
Here are some of the most common expenses you might see:
• Loan Origination Fee: Charged by your lender to process the loan
• Appraisal Fee: Ensures the home’s value matches the loan amount
• Title Insurance & Search: Protects against ownership disputes
• Escrow Fees: Covers third-party services for handling the transaction
• Prepaid Taxes & Insurance: Covers property taxes and homeowner’s insurance in advance
3. Who Pays Closing Costs?
Typically, both the buyer and the seller pay different portions of closing costs. However, buyers can sometimes negotiate for the seller to cover some of the costs.
Your real estate agent can help you structure your offer accordingly.
4. How to Reduce Closing Costs
You can minimize your closing costs by:
• Comparing loan offers from multiple lenders
• Negotiating fees
• Asking for seller concessions
• Reviewing the Loan Estimate for unnecessary charges
5. What to Expect at Closing
At your closing appointment, you’ll sign all final documents and make your payments. You’ll also receive a Closing Disclosure three days before, outlining the final terms and costs.
Bring a valid ID, a cashier’s check (if needed), and a whole lot of excitement—because the keys are coming next!
Conclusion
Closing costs are a normal part of the homebuying process, but knowing what to expect helps you avoid surprises. With proper planning and guidance, you can stay in control of your budget.
Want a better idea of what you’ll pay?
[Use Our Free Closing Cost Calculator.]
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