What are closing costs on a house?

Closing costs on a house are all the fees and expenses paid when finalizing a home purchase. 

While closing costs may feel like additional expenses you didn’t sign up for, they are very important and helpful to the homebuying process. Closing costs cover all the work behind the scenes of processing a loan as well as buying and selling a home. 

These closing costs will normally be a percentage of your loan or home’s value. If you are worried about closing costs when buying a home, there are several things you can do to try and lower the amount you will pay.  

Ready to talk to a professional Loan Officer and get an idea of what your closing costs may be? Start your home loan application today! 

A buyer’s closing costs tend to range from 2% to 6% of a home’s purchase price. If you are selling your home, you can expect to pay anywhere from 6% to 10% of the sale price. 

If you are looking to get a more accurate idea of how much you could be paying in closing costs, you can use an online closing costs calculator. 

Both buyers and sellers will have to pay closing costs when finalizing a home purchase, though sellers typically pay more. 

A buyer’s closing costs will cover lender and property related costs. Some of your closing costs will cover: 

• Appraisal and inspection fees to determine the home’s value and condition.
• Origination fees that lenders charge to process your application.
• Title search and insurance will make sure the seller has the right to sell their home and check for legal claims or disputes on the property.
• Escrow fees are to cover the cost of the escrow company that manages your closing process.
• Homeowner’s insurance for the first year helps protect a lender’s investment.
• Taxes on your property and transferring the title may be required depending on where the home is.

While they are not always needed, some places will require lawyers to review your documents. In states where this is mandatory, buyers will have to cover lawyer fees as well. 

All these closing costs can run buyers about 2% to 6% of the home’s purchase price. Because of this, more expensive homes could mean you pay a larger amount in closing costs. 

What many people don’t realize is that as a seller, you will also have closing costs you will have to cover when someone buys your home. Some of the things that are covered in a seller’s closing costs are: 

• Real estate commissions are one of the biggest costs that a seller may offer to cover.
• Transfer taxes will cover the cost of your property changing hands. In some areas this cost is split between the buyer and seller.
• Title insurances are paid by sellers to protect buyers in case problems arise during a title check. These can vary based on state and local laws.
• Homeowners association (HOA) fees, if you have any, will have to be paid and up to date before closing.

A seller’s closing costs can be 6% to 10% of the sale price. Some buyers may ask that repairs are made on a home before the purchase is complete. If a seller agrees to cover these costs, it will be on top of closing costs. 

If you are looking to reduce your closing costs as a buyer, you can consider negotiating your closing costs or exploring assistance programs. 

When looking to negotiate on a closing cost amount, ask your lender if there are any fee reductions that they offer or that you could qualify for. Another place where you could negotiate closing costs is with your seller. Some sellers may be willing to cover parts of your closing costs to help get you into the home. 

Another method when looking to lower your closing costs is assistance programs. Your state and local governments may offer low-interest loans or grants to help cover closing costs, especially if you are a first-time buyer. 

To find out what your closing costs might be, talk to a lender when you fill out a loan application. 

_{Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.} 

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