Here are the closing costs you can expect when buying a home. Understanding these costs ahead of time helps you avoid surprises and plan your budget with confidence.
Loan points.
Loan points, also called discount points, are optional fees paid upfront to lower your interest rate. One point typically equals 1% of the loan amount. Paying points can reduce your monthly payment, but it only makes sense if you plan to keep the loan long enough to recover the upfront cost.
Loan origination fees.
This fee is charged by the lender to process and create your mortgage. It usually covers underwriting, document preparation, and administrative work. Origination fees are often around 0.5% to 1% of the loan amount.
Private mortgage insurance (PMI)
PMI is required when your down payment is less than 20% of the home’s purchase price. It protects the lender, not the buyer, in case of default. PMI can be paid monthly, upfront, or as a combination of both, depending on the loan structure.
Title insurance
Title insurance protects you and the lender against issues with the property’s title, such as unpaid liens or ownership disputes. There are typically two policies: one for the lender and one for the buyer. This is a one-time cost paid at closing.
Attorney fees
In some states, a real estate attorney is required to handle or review the closing. Attorney fees cover contract review, document preparation, and ensuring the transaction follows local laws.
Closing fees
These are administrative fees charged by the title company or escrow agent for handling the closing process. They include document coordination, fund distribution, and final settlement preparation.
Recording fees
Local governments charge recording fees to officially record the sale and mortgage in public records. These fees are usually relatively small but mandatory.
Surveying fees
A property survey confirms boundary lines, lot size, and any encroachments. Some lenders require a recent survey before closing.
Property taxes
Buyers often prepay a portion of property taxes at closing or reimburse the seller for taxes already paid. This amount depends on local tax rates and the closing date.
City or County transfer taxes
Some cities or counties charge a transfer tax when property ownership changes. The cost is typically based on the sale price and varies by location.
HOA transfer fees
If the property is part of a homeowners association, there may be fees to transfer ownership records, provide documents, or set up a new account.
Down payment
The down payment is the portion of the purchase price you pay upfront. It is not a fee, but it is one of the largest cash requirements at closing and directly impacts your loan terms and monthly payment.
Knowing these costs in advance makes the closing process smoother and helps you make smarter financial decisions.
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