What Are Closing Costs?
Closing costs are fees associated with finalizing a real estate transaction. They typically range from 2-5% of the home price and must be paid before receiving the keys to your new home.
Breakdown of Common Closing Costs
Here’s a look at what’s typically included in closing costs:
| Closing Cost | Estimated Cost | Who Pays? |
|---|---|---|
| Loan Origination Fee | 0.5% - 1% of loan | Buyer |
| Home Appraisal | $300 - $600 | Buyer |
| Title Insurance | $500 - $1,000 | Buyer & Seller |
| Home Inspection | $300 - $500 | Buyer |
| Escrow Fees | $500 - $1,500 | Buyer & Seller |
Who Pays Closing Costs?
Both buyers and sellers typically share closing costs, but it depends on the negotiation. In some cases, sellers offer to cover some or all buyer closing costs as an incentive.
Ways to Lower Closing Costs
Here are some strategies to reduce closing costs:
- ✅ Ask the seller to contribute: Negotiating seller-paid closing costs can save you thousands.
- ✅ Shop around for lenders: Compare loan origination fees to find the best deal.
- ✅ Opt for a no-closing-cost mortgage: Some lenders allow this, but it usually results in a slightly higher interest rate.
- ✅ Check for first-time homebuyer programs: Many states offer grants or assistance for closing costs.
“Closing costs can be negotiated—never assume you have to pay the full amount upfront.”
— Sarah Thompson, Real Estate Expert
Frequently Asked Questions
Can closing costs be rolled into the mortgage?
Sometimes! Some lenders allow buyers to finance closing costs, but it increases the loan amount.
What happens if I can’t afford closing costs?
Many buyers negotiate seller concessions or look for down payment assistance programs to help cover costs.
How much should I budget for closing costs?
Expect to pay 2-5% of the home price. On a $300,000 home, that’s $6,000 - $15,000 in closing fees.