Just when you think you’ve saved up enough to put the down payment on your dream home (with maybe a bit more set aside for improvement projects), BAM — closing costs hit. They’re a routine part of buying a home, but many buyers (and sellers) may forget to account for them. When you’re figuring out how much of a down payment you can afford and the price range of your house, you should absolutely budget for closing costs because they can add up if you’re not actively setting aside money to toward those costs. We’ll break down what exactly encompasses closing costs and how much you should expect to pay.
What Are Closing Costs?
They’re a variety of fees and expenses related to officially closing on a house. Most of the expenses are the buyer’s responsibility, but some of them fall to the seller. They can include (but are not limited to):
- Realtor’s commission
- Appraisal and survey fee
- Loan origination fee
- Credit report/monitoring fee
- Property tax
- Title insurance
- Closing or escrow fee
- Attorney fees
- Mortgage points
- Mortgage broker fee
- Homeowner’s insurance premium
- Title fees
- Miscellaneous fees
How much are closing costs?
We can’t give you an exact number, but we can tell you to expect to pay between 2-5% of the loan amount in closing costs, including the down payment. Here’s an approximate breakdown of the numbers on about 99% of the loans we process:
- Title: ~$1,200 on refi; ~$2,300 on purchase
- Appraisal: ~$550
- Setting up an escrow account: ~6 months of taxes and insurance
- Insurance: ~$1,000
- Credit report fee: ~$50
- Lender fees
There are some fees other companies may charge, but we do not charge you for these:
- Underwriting fee: ~$900
- Processing fee: ~$495
- Loan origination fee/points (these depend on the rate chosen and if the lender has these)
Closing costs are expected to be paid at the time of the closing (obviously) along with the down payment, so be sure you have enough funds to cover it all in the bank.
While this is a lot extra in your budget, don’t let the fear of closing costs keep you out of your dream home! Just carefully budget and you’ll be moving into your dream home in no time.
