Closing costs are additional fees and payments that you have to make at closing when purchasing a home. These costs vary based on the price of the home and the financing method. According to Freddie Mac, typical closing costs include:
- application fees
- credit report fees
- loan origination fees
- appraisal fees
- home inspection fees
- title insurance
- homeowners’ insurance
- survey fees
- attorney fees
Some of these are one-time expenses, while others, like homeowners' insurance, are initial installment payments for ongoing responsibilities after taking possession of the home.
The closing costs vary greatly depending on your location and the price of the home. Typically, be prepared to pay between 2% and 5% of the home purchase price in closing fees. For example, if you're buying a home at the median price of $422,600, your closing fees could range from roughly $8,452 to $21,130. Remember that if you're looking at homes above or below this price range, your closing costs will be higher or lower accordingly.
Some tips to reduce your closing costs include negotiating with the seller to cover part or all of the expenses and shopping around for home insurance to find reliable coverage at a competitive rate.