Understanding Closing Costs When Buying a Home

Understanding Closing Costs When Buying a Home

Closing costs can add a significant amount to your home-buying budget, often ranging from 2% to 5% of the purchase price. Here’s a breakdown of the common fees you can expect at closing:

Loan Origination Fee
This fee covers the lender's costs for processing the loan. It can vary based on the lender and your loan amount.

Appraisal Fee
An appraisal determines the current market value of the home. This fee is typically paid upfront to the appraiser.

Home Inspection Fee
While not always included in closing costs, a home inspection is a critical step in identifying potential issues with the house.

Title Insurance
This protects the buyer and lender against any claims or legal issues regarding the title. It’s usually a one-time payment made at closing.

Escrow Fees
If you’re using an escrow service to handle the closing, they will charge a fee for their services, which may be split between buyer and seller.

Recording Fees
Local governments charge this fee to record the property transaction. It can vary by location.

Property Taxes
Depending on when the purchase takes place, you may need to pay a prorated share of the property taxes at closing.

Others
There may be additional costs, such as real estate agent commissions, homeowners' association (HOA) fees, and interim interest on the mortgage.