Buying a House

How much will my closing costs be?

Closing fees average around 2% of the purchase price—on a $200,000 home, that’s $4,000—but they can go as high as 5%.

The laundry list of costs is long. Before you even get to the closing table, you’ll pay the lender for a credit check and appraisal; you’ll also pay for an inspection, property survey and any attorney’s fees. At the closing you may be hit with other lender fees, plus a title search and lender’s title insurance, charges to record your deed and property transfer taxes. In addition, the lender will collect roughly two months of advance payments on property taxes and insurance.

The amount you pay shouldn’t come as a surprise. Within three days of receiving your application, your lender must provide a Good Faith Estimate listing anticipated charges. The estimate is just that—a ballpark figure that can (and often does) change prior to closing day. Just before closing, you’ll get an updated list, called a HUD-1 settlement statement, that itemizes final closing costs. Compare it to the original estimate, and question any items that are substantially different.

If you’re short on cash, your lender may let you roll closing costs into the mortgage amount. Just be aware that over time, the interest on those costs may add up to more than what you would have paid out-of-pocket. (HSH has a “Closing Cost Evaluator” that lets you compare the various scenarios.)

Sometimes a seller will agree to cover some or all of the closing costs—an offer that usually goes hand-in-hand with a higher purchase price.

To get a feel for average lender fees, including appraisals and credit checks, in your area, check out Bankrate’s annual ranking.

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