You’ve found the perfect home and you’re daydreaming about furniture layouts and backyard barbecues. But wait—what’s this about “closing costs”? Don’t worry—this article will help you understand exactly what to expect and how to prepare, so you can head to the closing table with confidence.
What Are Closing Costs?
Closing costs are the various fees and expenses you pay to finalize your home purchase. They cover everything from processing your mortgage to transferring the title—and while they might seem intimidating at first, they’re an essential part of protecting your investment.
Buyers typically pay between 2% and 6% of the loan amount in closing costs—but the actual figure depends on the loan type, location, and specific services involved. The good news? There are often ways to reduce or negotiate these costs—and I’ll walk you through your options.
Amy’s Tip: During the offer phase, buyers can ask sellers to help cover closing costs.
What Buyers Should Expect to Pay
Think of your closing costs as a supporting cast working behind the scenes to make sure your homebuying story has a happy ending. Here’s who’s involved:
- Loan Origination Fee: What your lender charges to process and underwrite your loan
- Appraisal Fee: Ensures the home’s value supports the price you’re paying
- Home Inspection Fee: A professional evaluation of the home’s condition—from roof to foundation
- Recording Fees: Charged by your local government to officially record your ownership
- Title Insurance: Protects you and your lender from past ownership claims or legal disputes
- Attorney Fees: Covers legal representation to review and finalize your purchase
- HOA Transfer Fee: If your new home is in an HOA community, you may be charged to transfer the account into your name.
Escrow Accounts & Prepaid Costs
Some expenses aren’t fees, per se—but they’re paid upfront at closing and affect your monthly mortgage payment. Your lender will typically collect:
- First Year’s Homeowners Insurance Premium
- Several Months of Property Taxes (based on local billing schedule and your closing date)
- Escrow Cushion: Typically two months of additional property tax and homeowners insurance held in reserve to cover potential increases
- Private Mortgage Insurance (PMI): Required if your down payment is less than 20%
- Flood Insurance: If required for your location, this will be prepaid at closing
Often Overlooked Costs: Surveys, Extra Inspections & Warranties
While not always required, these optional costs are often worth the peace of mind:
- Property Surveys: Confirm legal property lines and help avoid future boundary disputes
- Specialized Inspections: If your home inspection flags something concerning, follow-up inspections (like roof, structural, or HVAC specialists) may be needed
- Home Warranties: Short-term coverage for appliances and major systems like HVAC, electrical, or plumbing (some buyers ask the seller to include a warranty as part of the deal)
Seller Expenses to Anticipate
Sellers don’t walk away free and clear either—there are several common expenses to plan for:
- Deed Preparation Fees: To legally transfer property ownership
- Prorated Property Taxes: Covers the seller’s share of the annual tax bill
- HOA Transfer and Documentation Fees: Required by many homeowners associations
- Excise Taxes: State or local taxes based on the property’s sale price
Who Pays the Realtor Fees Now?
Historically, sellers paid commissions for both their listing agent and the buyer’s agent—but the rules have changed.
Following a major 2024 settlement involving the National Association of Realtors, sellers are no longer required to pay the buyer’s agent. Now, buyers are encouraged to sign a written agreement with their agent and may need to cover those fees themselves. However, this is still negotiable.
Buyers can ask the seller to contribute toward their agent’s commission during the negotiation process. And while sellers can choose to offer compensation as an incentive, those offers are no longer displayed on the MLS—giving both parties more flexibility in how deals are structured.
Final Thoughts
Closing costs might seem like a maze, but with the right guidance, it’s one you can navigate with confidence. By understanding who pays what and why, you can better plan your budget and avoid last-minute surprises.
Amy and her dedicated team are known for their strategic lending solutions tailored to each client’s unique financial goals. Through their Personal Coaching Program, you will be guided through the complexities of mortgage planning, ensuring you make informed decisions every step of the way.
Ready to start your homebuying adventure? Contact us and we will help guide you to the closing table feeling confident every step of the way.
