Closing Costs Explained: What You’ll Actually Pay

Buying a home is one of the biggest financial decisions you’ll ever make—but it comes with more than just the purchase price. One of the most overlooked expenses? Closing costs.

If you're buying (or selling) a home, it's important to understand what closing costs are, what they cover, and how much you should expect to pay. Let’s break it down:

💡 What Are Closing Costs?

Closing costs are the fees and charges associated with finalizing a real estate transaction. These costs are paid at the closing table, the day when ownership of the home is officially transferred.

They typically range from 2% to 5% of the home’s purchase price, depending on your loan type, location, and other factors.

🧾 What’s Included in Closing Costs?

Here’s a breakdown of common fees buyers (and sometimes sellers) might encounter:

For Buyers:

• Loan Origination Fee – Charged by the lender for processing the loan.

• Appraisal Fee – Covers the professional appraisal of the property.

• Credit Report Fee – Required by lenders to check your creditworthiness.

• Title Search & Title Insurance – Ensures the property is free of liens and protects against title disputes.

• Escrow Fees – Paid to the escrow company managing the transaction.

• Prepaid Taxes & Insurance – Lenders often require up-front payment of property taxes and homeowners insurance.

• Recording Fees – Paid to the county for officially recording the deed and mortgage.

For Sellers:

• Agent Commission – Usually 5–6% of the sale price, split between the buyer's and seller's agents.

• Escrow Fees – Shared with buyer in many markets.

• Title Insurance (for the buyer’s protection) – Often paid by the seller in some states.

• Transfer Taxes – Varies by location.

💰 How Much Will You Pay?

Here’s a quick example:
If you're buying a $500,000 home, your closing costs might be:

• 2% = $10,000

• 5% = $25,000

Your lender should provide a Loan Estimate early in the process and a Closing Disclosure before your closing date, so you can review and understand every cost.

🧠 Pro Tips:

• Ask the Seller to Help: In some cases, sellers may agree to contribute to your closing costs—especially in a buyer’s market.

• Shop Around for Services: You may be able to choose your title company or inspector, which can reduce costs.

• Don’t Skip the Pre-Approval: Knowing your budget helps avoid surprises at closing.

✅ Final Thoughts

Closing costs can feel overwhelming at first, but being informed will save you from surprises. Always ask questions and review your disclosures closely.

Have questions about your closing costs or need help navigating your home purchase? Let’s talk—I’m here to guide you through every step of the process.

📲 Contact me today for a free consultation!