When buying a home, many people focus on the purchase price and their down payment — but closing costs are an equally important part of the transaction. These costs can sometimes surprise buyers if they’re not prepared. In this guide, I’ll break down what closing costs are, what they include, how to plan for them, and how you can get a seller to pay for all of them.
What Are Closing Costs?
Closing costs are the fees and expenses you pay at the end of a real estate transaction (at closing). Closing costs are combined with your downpayment and make up your total “cash to close amount” (how much money you need to bring to closing) . Closing costs cover the services, paperwork, and processes provided by the title company and lender and also your prepaid expenses such as home owners insurance.
Depending on the price of the home, the lender and the type of loan product you’re receiving, a good estimate for your total closing costs is around $7,000.00. So if you’re wanting to calculate how much cash you need to close on a home, taking $7,000.00 and adding it to your down payment amount will get you close! Keep in mind-there are ways to get the seller to pay for all of your closing costs!!! More info to come!
What’s Included in Closing Costs
While every transaction is unique, here are some of the most common expenses you may see:
- Loan Origination Fees – Charged by the lender for processing your mortgage application.
- Appraisal Fee – Covers the cost of having a licensed appraiser determine the home’s market value. In most cases, this is required by the lender.
- Title Search & Title Insurance – Protects you from disputes over property ownership.
- Recording Fees – Fees to officially record your purchase.
- Prepaid Costs – Items like homeowner’s insurance premiums, property taxes, and interest that must be paid in advance.
Who Pays Closing Costs?
Did you know that closing costs can be paid by the buyer, seller, or both? — depending on how we write the offer, in some cases, buyers can negotiate for the seller to cover part of or all of the closing costs! Working with an experienced agent is important to ensure you get the negotiation skills needed to put you in the best situation.
Tips for Being Prepared For Closing Costs
- Ask Your Lender – Different lenders have different fees, so ask them up front what to expect.
- Ask Your Agent – Talking through your situation and goals with me will allow us to discuss different options and decide on what the best plan is for you.
- Run Your Numbers– After talking to your lender and realtor, run your numbers. Think about how much your down payment plus closing costs will be and how much that will leave you in savings after you close on your home. If those numbers are too tight, then we know up front that we are trying to negotiate a way to get your closing costs covered by the seller so that you can keep that money in your pocket as an emergency fund.
Final Thoughts
Closing costs are a normal part of buying a home, but understanding them ahead of time can help you avoid last-minute surprises. By budgeting for these costs early in your home-buying journey, you’ll have a smoother path to getting your keys and moving in.