What closing costs include
Buyers typically pay 2% to 5% of the price at closing, on top of the down payment. Costs fall into three groups:
- Lender charges: origination or underwriting fees and any discount points.
- Third-party and government: appraisal, inspection, credit report, title insurance, settlement or escrow fees, recording fees and, in some states, transfer taxes.
- Prepaids: homeowners insurance for the first year, a few months of property tax and insurance to start your escrow account, and interest until your first payment.
Example: a $350,000 home with 10% down has a $315,000 loan. 1% lender fees ($3,150), $1,000 for appraisal and inspection, $2,000 for title and escrow, 0.5% recording and transfer taxes ($1,750) and $2,500 of prepaids total $10,400, 2.97% of the price. With the $35,000 down payment, you need $45,400 at closing.
How to lower closing costs
- Compare Loan Estimates from several lenders; the lender section is the most negotiable.
- Ask for seller credits, especially in a slower market.
- Shop for title and settlement services where your Loan Estimate says you can.
- First-time buyer programs in many states help with closing costs.
Deciding on points? Use the mortgage points calculator.
Frequently asked questions
How much are closing costs for a buyer?
Usually 2% to 5% of the purchase price, so $7,000 to $17,500 on a $350,000 home, depending on the state, lender and loan type.
Can closing costs be rolled into the mortgage?
On a purchase, usually not directly, but seller credits or a slightly higher rate in exchange for lender credits can cover them. On a refinance, they can often be added to the loan.
What is cash to close?
Your down payment plus closing costs, minus credits and any earnest money you already paid. It's listed on page 3 of your Closing Disclosure.
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