HOME BUYERS: Here are your closing costs...


Buying a home can be very confusing, especially if you're a first time home buyer. Closing costs can be one of the confusing factors when it comes to buying a home- mainly due in part that they vary. What do I pay for? What should I expect? Well, buyers have the lion's share of closing costs mostly due to the fact that most closing costs are associated with the mortgage. Here is some important information that may help you prepare.

What are closing costs?

Closing costs are those fee's paid to third parties that help facilitate the sale of a home. As a rule of thumb, you can ESTIMATE they'll typically total 2%-7% of the purchase price. Buyers and sellers typically both contribute to the costs at closing, but buyers have the majority compared to sellers. 

What will I be paying for?

Here are some of the fees home buyers should brace themselves to pay:

  • Application fee:

    • This fee goes toward the lender to process your mortgage application. It may be worth it to find out what it covers- sometimes it covers the credit check or appraisal, sometimes not. 
  • Appraisal:

    • This fee is paid to a third party company, to evaluate the value of the home you're purchasing. It's not an inspection.
  • Closing Fee/Escrow Fee: 

    • This is a fee that is paid to the title/escrow company for their part in helping your home close. They oversee the closing as an independent party in your home purchase to ensure everything goes smooth!
  • Credit Report: 

    • Your credit report determines a lot about your mortgage rate. 
  • Home Inspection: 

    • To verify condition of a property, an inspection will be conducted, and this is a fee that will be charged to the buyer. 
  • Homeowners’ Insurance: 

    • This covers any possible damage to your home. 
  • Discount Points:

    • Points are prepaid interest and one point is one percent of your loan amount. This lowers your monthly payment for the life of your loan. 
  • Title Insurance: 

    • This is a policy that protects you in the event someone challenges the ownership of your home. 
  • Origination Fee:

    • This is to cover the administrative costs of the lender- typically 1% of the total loan, but you can also find loans without them.
  • Prepaid Interest:

    • Most lenders ask that this is paid to cover interest that happens between closing and date of your fist mortgage payment. 
  • Private Mortgage Insurance (PMI): 

    • If your down payment is less than 20%, you'll be required to pay this. 
  • Recording Fees: 

    • A fee charged by our local recording office for the recording of public land records. 
  • Survey Fee:

    • A survey fee is used to verify all property lines. 
  • Title Fee:

    • This is a fee paid tot he title company for triple checking the property's records. They make sure there's no deeds and your home is good to move in- VERY important!
  • Underwriting Fee:

    • Another fee to the lender, for their labor when looking into whether or not they should approve you for the loan. 

So there you have it. Yes, the fees will vary, depending on your unique situation. You could have half the list, or the list above AND more. As a good rule of thumb, just be prepared for ~2%-7% of your home purchase price for closing. As a home buyer, you'll receive an extensive, itemized list of closing costs, so DON'T think you'll be left in the dark. 

Thank you for reading and please don't hesitate to reach out with any questions!