What are closing costs on a house?
Closing costs on a house are all the fees and expenses paid when finalizing a home purchase.
While closing costs may feel like additional expenses you didn’t sign up for, they are very important and helpful to the homebuying process. Closing costs cover all the work behind the scenes of processing a loan as well as buying and selling a home.
These closing costs will normally be a percentage of your loan or home’s value. If you are worried about closing costs when buying a home, there are several things you can do to try and lower the amount you will pay.
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How much are closing costs on average?
A buyer’s closing costs tend to range from 2% to 6% of a home’s purchase price. If you are selling your home, you can expect to pay anywhere from 6% to 10% of the sale price.
If you are looking to get a more accurate idea of how much you could be paying in closing costs, you can use an online closing costs calculator.
Who pays closing costs?
Both buyers and sellers will have to pay closing costs when finalizing a home purchase, though sellers typically pay more.
Closing costs paid by the buyer
A buyer’s closing costs will cover lender and property related costs. Some of your closing costs will cover:
- Appraisal and inspection fees to determine the home’s value and condition.
- Origination fees that lenders charge to process your application.
- Title search and insurance will make sure the seller has the right to sell their home and check for legal claims or disputes on the property.
- Escrow fees are to cover the cost of the escrow company that manages your closing process.
- Homeowner’s insurance for the first year helps protect a lender’s investment.
- Taxes on your property and transferring the title may be required depending on where the home is.
While they are not always needed, some places will require lawyers to review your documents. In states where this is mandatory, buyers will have to cover lawyer fees as well.
All these closing costs can run buyers about 2% to 6% of the home’s purchase price. Because of this, more expensive homes could mean you pay a larger amount in closing costs.
Closing costs paid by the seller
What many people don’t realize is that as a seller, you will also have closing costs you will have to cover when someone buys your home. Some of the things that are covered in a seller’s closing costs are:
- Real estate commissions are one of the biggest costs that a seller may offer to cover.
- Transfer taxes will cover the cost of your property changing hands. In some areas this cost is split between the buyer and seller.
- Title insurances are paid by sellers to protect buyers in case problems arise during a title check. These can vary based on state and local laws.
- Homeowners association (HOA) fees, if you have any, will have to be paid and up to date before closing.
A seller’s closing costs can be 6% to 10% of the sale price. Some buyers may ask that repairs are made on a home before the purchase is complete. If a seller agrees to cover these costs, it will be on top of closing costs.
How to reduce closing costs
If you are looking to reduce your closing costs as a buyer, you can consider negotiating your closing costs or exploring assistance programs.
When looking to negotiate on a closing cost amount, ask your lender if there are any fee reductions that they offer or that you could qualify for. Another place where you could negotiate closing costs is with your seller. Some sellers may be willing to cover parts of your closing costs to help get you into the home.
Another method when looking to lower your closing costs is assistance programs. Your state and local governments may offer low-interest loans or grants to help cover closing costs, especially if you are a first-time buyer.
To find out what your closing costs might be, talk to a lender when you fill out a loan application.
Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.
All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. OriginPoint does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error-free. Some information in the publication may have been provided by third parties and has not necessarily been verified by OriginPoint. OriginPoint, its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.
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OriginPoint's Same-Day Mortgage (aka “FastTrack”) promotion offers qualified customers who provide certain required financial information/documentation to OriginPoint within 8 hours of locking a rate on a mortgage loan the opportunity to receive a loan approval within 1 business day of timely submission of documentation and does not suggest that the borrower will receive funding on the same day as their application submission. For purposes of this offer, documents provided after 1 pm local time or on a weekend or company holiday will be deemed submitted the next business day. OriginPoint cannot guarantee that a loan will be approved or that a closing will occur within a specific timeframe. OriginPoint reserves the right to revoke this approval at any time if there is a change in your financial condition or credit history which would impair your ability to repay this obligation. Read and understand your Loan Commitment before waiving any mortgage contingencies. Borrower documentation and Intent to Proceed must be signed within 8 business hours of receipt. Not eligible for all loan types or residence types. Minimum down payment requirements apply. Self-employed borrowers and Co-borrowers are not eligible. Not all borrowers will be approved. Borrower's interest rate will depend upon the specific characteristics of borrower's loan transaction, credit profile and other criteria. Eligible borrowers who successfully provide all required documentation within 8 business hours will receive a $250 Closing Cost Credit applied at closing, no cash value, and may not be combined with any other Lender promotions, discounts, or concessions. Not available in all states. Restrictions apply. Visit OriginPoint.com/same-day-mortgage for terms and conditions.
**Eligible borrowers must qualify for a "Clear to Close Loan Commitment" ("CTC”). OriginPoint cannot guarantee that a loan will be approved or that a closing will occur within a specific timeframe. CTC is subject to certain underwriting conditions, including clear title and no loss of appraisal waiver, amongst others. Not eligible for all loan types or residence types. Minimum down payment requirements apply. Property must be eligible for an Appraisal Waiver and borrower must opt in to AccountChek for automated income and asset verification. Self-employed borrowers and Co-borrowers are not eligible. Not all borrowers will be approved. Restrictions apply.
Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Restrictions may apply, contact OriginPoint for current rates and for more information. All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. OriginPoint LLC fka Guaranteed Rate Affinity, LLC does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by OriginPoint LLC fka Guaranteed Rate Affinity, LLC. OriginPoint LLC fka Guaranteed Rate Affinity, LLC its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action. OriginPoint does not provide tax advice. Please contact your tax adviser for any tax related questions.
