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What Are Closing Costs?

Home Buying and Closing Costs

What Are Closing Costs When Buying A Home?


It’s the home-buying season again, and part of the process of determining the cost of buying a home is considering the closing costs associated with the house you are buying. We break down closing costs and how much you should expect to pay at closing. Closing costs are the amount the buyer and seller need to pay during the home buying process.


How Is Closing Costs Determined


Closing costs include loan fees, appraisal fees, title insurance, home inspections, and taxes as part of the cost of buying a home. Generally, these costs add up to 2% to 3% of the home purchase price.


Closing Cost Of Buying A Home


Buyers closing costs include:


  • Appraisal Fees -  The mortgage company will conduct a home appraisal based on a certified appraiser's assessment of the property.  The cost of the appraisal is included in the closing costs.

  • Application Fees - Some mortgage companies and lenders charge an application fee to process the loan request.

  • Title fees - One of the main closing costs is the title fees.  This includes the title search fee, title settlement fee, the cost of the title insurance, and attorney's fees.

  • Inspection - The cost to inspect your home generally costs $300 -$500.  A certified home inspector is hired to conduct a home inspection of the home to examine the property and major components for repairs or defects.  

  • Homeowners Insurance - The cost of the homeowners insurance is usually paid before or at closing. Your mortgage company may require a paid receipt and evidence of insurance before closing to confirm home insurance has been purchased. The home insurance premium will be held in escrow and your mortgage company may pay the premium in full every year and bill you in your monthly mortgage payment.

  • Credit reporting costs - When you apply for a mortgage the cost to process the credit reports are included in the closing costs.

Closing Cost of Selling A Home


The seller is also responsible for closing costs when selling their home.


  • Real estate agent commission - Real estate agents include their commission or fee in the closing costs.  The market, show, and assist in the sale of the home. Generally, this fee is 5% -6% of the home sale price.

  • Transfer tax - Also known as the deed transfer tax, it is a one-time tax or fee imposed by the state or local municipality on the transfer of the real estate property. The transfer tax is usually 1% of the total purchase price of the property.

  • Title Insurance - Protect the homeowners against any potential issues with the title that may be discovered after closing on the home.  The cost of the title insurance is covered by the seller of the home.

  • Pro-rate property tax - This may be required to be paid at closing if property taxes are due and is paid on a pro-rated basis.

  • Attorney’s fees - The attorney review and closing cost fees.  The cost of attorney's fees and closing costs are usually 1.6% of the home's final sale price.


Who Pays The Closing Costs?


Both the buyers and sellers pay the closing costs.  


When Are Closing Costs Due?


Closing costs are due when the home is being sold, also known as the closing date.


What Other Costs Should Be Budgeted When Buying A Home?


  • Moving Cost

  • Property Taxes

Be Prepared At Your Home Closing.

Closing costs can add up when it’s time to buy or sell your home. Budgeting these costs is important, and will minimize your surprises at the closing table. One way to help budget for these costs is to work with a realtor, mortgage broker, and independent insurance agent.  


As an independent insurance agent, we can quickly quote your homeowners insurance policy with many different insurance companies to find the best coverage and premium fit for your budget and needs. We are just a call or click away and always here to help you in your home buying journey.


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