Closing Costs You Should Budget for When Purchasing a U.S. Home

Answer

Buying a home involves more than just the sale price. Closing costs are the fees and charges you pay to complete a real estate transaction. These expenses cover services from lenders, title companies, and government agencies to finalize your purchase.

Typically, closing costs range from 2% to 5% of the purchase price. For a $300,000 home, that means $6,000–$15,000 in additional expenses. Exact amounts can vary by state, lender, and property type.

• Loan origination fee: Charged by your lender to process the mortgage, often 0.5–1% of the loan amount.
• Appraisal fee: Covers a professional valuation of the property (usually $300–$500).
• Home inspection: Optional but recommended; inspections cost $300–$600 on average.
• Title search and title insurance: Ensures the title is clear; one-time premium can be 0.5–1% of loan amount.
• Recording and transfer taxes: Government fees for public records; amounts depend on county or state rates.
• Escrow fees: Charged by escrow or settlement agent for handling funds and documents.
• Prepaid items: Property taxes, homeowner’s insurance, and interest to cover the period between closing and first mortgage payment.
• Other charges: Survey fees, HOA fees, flood certifications, and courier fees.

Lenders must provide a Loan Estimate within three business days of application and a Closing Disclosure at least three days before closing. These documents break down each fee, helping you compare offers and avoid surprises.

Closing costs can also be negotiated. Sellers may agree to pay a portion of your fees (often called seller concessions), reducing upfront expenses. Before setting a closing date, review your Closing Disclosure carefully and contact your lender or title company if you spot discrepancies.

Each state and transaction is unique. HUD and the National Association of Realtors offer resources on typical fees and protections. Remember, this information is for educational purposes only; it’s advisable to consult a licensed attorney or real estate professional before finalizing any contract.