What Are Closing Costs?

June 7, 2020

Real Estate

What Are Closing Costs?

Often buyers and sellers ask me about closing costs.  Specifically what do they include and how much should they budget.  Simply put, closing costs are fees associated with the purchase of a home that are due at the end of the sales transaction.  Both the buyer and the seller usually have closing costs.

The term “closing costs” includes a variety of expenses above the purchase price of your property, such as the appraisal, the home inspection,  a title search, title insurance, taxes, HOA documents (if applicable) lender costs and some upfront housing expenses such as homeowners insurance. Some of those costs are nonnegotiable, such as recording or transfer taxes charged by your state or local government. Others, such as your lender’s fee, can be negotiated.

The amount a buyer will pay in closing costs varies based on the size of the loan and local taxes and fees, but a general rule is that they average 1% to 4% of the purchase price. For example, if you’re buying a $300,000 house, the total closing costs could range from $3,000 to $12,000. The national average for closing costs on a single-family home in 2019 was almost $4,876 including taxes, according to a ClosingCorp, a real estate data firm.

Your Realtor® should be able to get you an estimated Sellers or Buyers Worksheet from the escrow company so you have an idea of what to expect.

By law, if you’re buying a home, you receive a loan estimate within three days of your lender receiving your loan application. That document includes an estimate of closing costs. Three days before your scheduled closing, you should receive your closing disclosure, a document that provides final details about your loan and your closing costs.

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