Buyers: What You Need to Know About Closing Costs

Buying a home is exciting—but it also comes with a lot of new lingo and unexpected expenses. The biggest surprise for many, especially first-time buyers? Closing costs. Closing costs are the various fees and charges you’ll pay, in addition to your down payment, on closing day. Here’s a quick, friendly guide to help you understand what they are, how much to expect, and how to prepare.

There are a few buyer costs that must be paid up front, shortly after you’re under contract to purchase the home. These are “out of pocket” charges:

• Home Inspection ($400-$600, depending on home size)

• Additional inspections (if necessary)

• Appraisal ($500-$800)

Once you get to closing, here are the fees typically included in a buyer’s closing costs:

• Lender fees (points and origination charges, $1100-$2000)

• Various other lender fees (credit report, flood certification, etc., ~$500)

• Escrow fees ($800-$1000)

• Lender’s Title Insurance policy ($1000-$1500)

• Prepaid costs, which include:

  • 1 year of homeowner’s insurance premium + additional 3 months to lender’s impound account

  • 3-4 months of property taxes to lender’s impound account

  • Interest on loan from date of close until 1st day of the next month

  • Prepaid HOA dues (2-3 months)

• Recording fees ($60-$120)

• HOA transfer & disclosure fees

📊 How Much Will You Pay?

There are many things that contribute to your closing cost amount, but the two largest fees are lender origination/points and prepaid costs (HO insurance, property taxes, prepaid interest, and HOA dues). The total cost of these items are also affected by your close of escrow date. For example, if you close on the 2nd of the month, you’ll pay 28-29 days of prepaid interest, which would be much more than closing on the 25th of the month and only pay 5-6 days of prepaid interest.

🧾 Can You Lower the Cost?

In today’s market, the answer is YES! In a buyer’s market like we have today, it is normal for buyer’s to ask the seller for concessions, which will reduce or even eliminate the buyers having to pay for these costs. Many times, buyers will ask for concessions to cover closing costs instead of asking for a reduction in purchase price, reducing their out of pocket costs at closing.

✅ Don’t Skip the Closing Disclosure

You won’t have to wait until close day to be surprised by your closing costs. Your lender is required to send you a Loan Estimate shortly after opening escrow, which details all of the costs of the loan and escrow. Then just before closing, the lender will give you a Closing Disclosure at least 3 business days before you close that lists all your final costs line by line and tell you exactly what your monthly mortgage payment will be.

TeamHarry REALTORS can do one better! Once you have been pre-qualified, we can estimate your monthly mortgage payment when you first see a home, making it easier to make those value decisions before you decide to write an offer on a home. This gives you peace of mind knowing exactly what that home will cost you on a monthly basis and makes comparing multiple home values much easier.