Understanding Closing Costs When Buying a Home

Buying a home is one of the most exciting—and financially significant—steps many people take in life. While most buyers focus on the down payment and monthly mortgage, it’s crucial to plan for another major expense: closing costs.

What Are Closing Costs?
Closing costs are the fees and expenses you pay to finalize your home purchase. These costs are separate from your down payment and are typically due on the day you close on your new home.

How Much Are Closing Costs?
Closing costs usually range from 2% to 5% of the home’s purchase price. So, if you're buying a $300,000 home, your closing costs could be anywhere from $6,000 to $15,000. The exact amount depends on your loan type, location, and the specifics of your transaction.

What Do Closing Costs Include?
Here’s a breakdown of common items included in closing costs:

• Loan Origination Fee – Charged by the lender to process your loan (typically 0.5%–1% of the loan amount).
• Appraisal Fee – Pays for a professional assessment of the home’s market value.
• Home Inspection Fee – Although not always required, it’s highly recommended to identify potential issues.
• Title Search and Title Insurance – Ensures the seller legally owns the home and protects against future title disputes.
• Attorney Fees – If a lawyer is involved in reviewing or preparing paperwork (required in some states).
• Recording Fees – Charged by your local government to record the property sale.
• Escrow Fees – Covers services provided by the escrow company handling the transaction.
• Prepaid Costs – Includes property taxes, homeowners insurance, and prepaid interest on your mortgage.

​Who Pays Closing Costs?
In most cases, buyers pay the majority of closing costs, but sellers also have fees, especially if they're covering part of the buyer’s costs as part of the negotiation. In some markets, buyers may be able to ask for a seller concession to help reduce the financial burden.

Can You Reduce Closing Costs?
Yes! Here are a few tips:

• Shop around for lenders to compare origination and processing fees.
• Ask for a Loan Estimate early in the process to see a breakdown of fees.
• Negotiate with the seller to cover part of the costs.
• Look for first-time buyer programs that offer assistance with closing costs.

Final Thoughts
Closing costs can be a surprise if you're not prepared, but with the right planning and a trusted real estate professional on your side, you’ll have a clear picture of what to expect. Understanding these costs in advance ensures there are no last-minute surprises when you get to the closing table—and helps you enjoy your new home with confidence.