How Much Are Closing Costs When Buying a House?

 March 31, 2021
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Between finding the right house, getting it inspected, making an offer and saving up for a down payment, it’s easy for details like closing costs to get lost in the shuffle. However, when budgeting for a new home, it’s important to ask the question: “How much are closing costs?”

To learn what kinds of closing costs to expect when buying a home — and how to lower them — we’ll answer these questions:

What are closing costs?

When nailing down a mortgage and negotiating the purchase of a property, you’ll oftentimes need to utilize the services of an agent, an appraiser or an attorney, among others who may be involved in the process of real estate purchasing. Closing costs cover the various fees and expenses those services incur. This can include processing fees from your lender as well.

Both buyers and sellers may be required to pay closing costs during the sale of a home.

How much are closing costs for buyers?

Closing costs typically run between 2% to 6% of the price of the home. For instance, if you take out a home loan for $300,000, your closing costs could run anywhere from $6,000 to $18,000 — not exactly small change, especially if you also owe student loans.

After you complete your loan application, the lender will provide you with a document called a loan estimate, which includes what your closing costs might be. As the name of the document suggests, it provides only estimates. However, those estimates will give you an idea of what to expect.

How much are closing costs for sellers?

While buyers typically take on most of the closing costs, sellers also usually have to pay a few expenses as well. This can typically run from 2% to 6% of the purchase price of the property. However, the closing costs for sellers can be higher because, in many cases, sellers cover the real estate agents’ commission for both themselves and the buyer.

As a seller, you may also have to pay attorney fees, HOA fees, and the prorated property tax for the home, among other costs.

What are the fees that come with closing costs?

Here are some costs you might find on your loan estimate.

  • Application fee: This fee covers the cost of the loan underwriting process. Not all lenders charge this fee, but some who do may be willing to negotiate.
  • Appraisal fee: This fee is paid directly to the appraisal company that determines the fair market value of the home you’re purchasing.
  • Attorney fee: In states that require it, this fee covers the cost of having an attorney review the final documents prepared by the lender or seller on your behalf or the lender’s behalf.
  • Courier fee: When applicable, this fee covers the cost of transporting the documents to make sure you close on time.
  • Credit report fee: Your credit history is a major factor in the underwriting process. This fee covers the cost of pulling your three credit reports to see if anything is amiss.
  • Discount points: With a lump-sum payment at closing, you can lower your interest rate for the life of the loan by purchasing discount points. Each point costs 1% of the loan amount. Essentially, these discount points are prepaid interest.
  • Document preparation fee: Either the lender or the title company might charge this fee to cover the time spent preparing your loan documents.
  • Escrow fee: This fee is paid to the title company, escrow company or attorney who is responsible for conducting the closing of your loan. It also might include other services, like recording your title information.
  • Escrow deposit: When you close on your house, you typically need to put a couple of months’ worth of property tax and mortgage insurance into your escrow account. Future mortgage payments will include escrow payments to keep them paid in full.
  • FHA Upfront Mortgage Insurance Premium (UFMIP): If you’re getting a Federal Housing Administration (FHA) loan, you’re required to pay a UFMIP upon closing. The cost is 1.75% of the base loan amount.
  • Flood determination fee: If the area you live in has flood zones, this fee is paid to a third party that will determine if your house is located in one. If so, you’ll need to purchase flood insurance as well.
  • Home inspection fee: This fee goes to the third-party inspection company that verifies the condition of the property and determines what kind of repairs might be necessary. Inspections for pests and lead-based paint might be performed separately.
  • Homeowners association (HOA) dues: If you’re buying a house in an HOA, the association might require that you pay a couple of months’ worth of dues and an investment fee to join.
  • Homeowners insurance: Typically paid annually and due at closing, your homeowners insurance policy covers you if your house sustains certain damages.
  • Origination fee: In addition to the application, the lender has other costs associated with setting up your loan, including administration and processing fees.
  • Prepaid interest: Since you usually don’t have to make your first mortgage payment until a month after you close, some lenders require that you prepay the interest that accrues in the meantime.
  • Real estate agent commission: Among other fees, real estate agents often make commission on their sales. This can cost anywhere from 5% to 8% of a home’s sale price, though typically it’s 6%.
  • Recording fee: This fee goes to the city or county office that’s responsible for recording public land records for the sale.
  • Survey fee: Where required, this fee goes to a third-party surveying company to verify property lines.
  • Title insurance: There are two types of title insurance: lender’s and buyer’s. The former is mandatory and protects the lender if there’s a problem with the title. The latter is optional and protects you if someone challenges your right to own the home.
  • Title search fee: This fee goes to the title company for doing a thorough search of the property records and deeds to make sure no one else has a legal claim on the home.
  • Transfer taxes: These taxes are paid when the seller transfers the title to the borrower.
  • VA funding fee: If you have a VA loan, this fee is due upon closing and ranges from 1.4% to 3.6% of the loan amount.

How much are closing costs on a refinance?

You may need to pay closing costs even if you’re refinancing your home. Fees for refinancing may be similar to those you made when you first bought your home. This can cost anywhere from 2% to 6%, depending on the size of your loan, where you live and your lender.

Type of fee Typical cost
Loan application fee $75 to $500
Loan origination/underwriting fee 0% to 1.5% of loan amount
Home appraisal fee $300 to $400
Credit report fee $30 to $50
Title search/insurance fee $400 to $900
Mortgage points 1% of loan amount per point
Settlement fee $500 to $1,000

How can I lower my closing costs?

There’s not a lot of room for negotiating each line item in your closing costs. But with some lenders, there are ways to limit how much you owe at closing.

1. Look for promotions

Promotions typically happen only with new-construction homes as a way to incentivize buyers to buy now and use their builders’ preferred lenders.

For instance, the builder of new-construction homes may offer to pay a certain amount of buyers’ closing costs if they go with one of its preferred lenders for the mortgage loan.

2. Compare lenders

Just as with any other type of loan, you’ll want to shop around to compare various rates and terms. In particular, you’ll want to ask lenders about their interest rates, fees and closing costs. These factors can make a big difference in how much you end up paying overall. Take your time in comparing lenders, and don’t feel pressured in accepting the first offer you’re approved for. Also be aware how refinancing other debt, such as student loans, can affect the rate you get.

3. Negotiate with the seller

If the seller is desperate to get rid of the house — maybe they’ve already bought a new home and don’t want two mortgage payments — they might be willing to help cover some of the costs.

Another way to negotiate is to offer a higher sale price in return for the seller paying the closing costs. Even though you’re technically still paying more, you’re effectively rolling the closing costs into your loan rather than paying for them in cash at closing.

4. Take a higher interest rate

Lenders often are willing to give you credits to cover your closing costs in return for a slightly higher interest rate on your loan. Before you agree to this arrangement, calculate how much that higher interest rate would cost you for the time you’ll be staying in the home.

It can be worth doing if you’re planning to move or refinance after a few years. But the longer you stick with the mortgage, the more likely it is that the higher interest rate will end up being more expensive.

Closing costs: more FAQs

How do I calculate closing costs?

You can prepare to cover your closing costs by budgeting between 2% to 6% of the total cost of your loan. You should receive your closing cost amount from your lender in the loan estimate and closing disclosure.

Can I roll closing costs into my mortgage?

Yes and no — whether or not you’re able to roll your closing costs into your mortgage may depend on the lender and the type of loan you get. Keep in mind, however, that if you choose this route, you may have to pay interest on your closing costs.

When do I pay closing costs?

Closing costs are due at the closing of the sale when you sign your mortgage loan documents. This is typically when you’ll pay your down payment as well.

Interested in refinancing student loans?

Here are the top 9 lenders of 2022!
LenderVariable APREligible Degrees 
1.74% – 8.70%1Undergrad
& Graduate

Visit Splash

1.74% – 7.99%2Undergrad
& Graduate

Visit Earnest

1.74% – 7.99%3Undergrad
& Graduate

Visit SoFi

1.89% – 5.90%4Undergrad
& Graduate

Visit Laurel Road

1.74% – 7.99%5Undergrad
& Graduate

Visit NaviRefi

2.05% – 5.25%6Undergrad
& Graduate

Visit Lendkey

1.86% – 6.01%Undergrad
& Graduate

Visit Elfi

N/A7Undergrad
& Graduate

Visit PenFed

1.99% – 8.38%8Undergrad
& Graduate

Visit Citizens

Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 4, 2022.


2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.

Earnest Disclosures

Student Loan Refinance Interest Rate Disclosure Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.99% APR to 8.24% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loan refinance loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. The maximum rate for your loan is 8.95% if your loan term is 10 years or less. For loan terms of more than 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95%. Please note, we are not able to offer variable rate loans in AK, IL, MN, NH, OH, TN, and TX. Let us know if you have any questions and feel free to reach out directly to our team.


3 Important Disclosures for SoFi.

SoFi Disclosures

Fixed rates range from 3.49% APR to 7.99% APR with a 0.25% autopay discount. Variable rates from 1.74% APR to 7.99% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.


4 Important Disclosures for Laurel Road.

Laurel Road Disclosures

All credit products are subject to credit approval.

Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.

As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.

  1. Checking your rate with Laurel Road only requires a soft credit pull, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
  2. Savings vary based on rate and term of your existing and refinanced loan(s). Refinancing to a longer term may lower your monthly payments, but may also increase the total interest paid over the life of the loan. Refinancing to a shorter term may increase your monthly payments, but may lower the total interest paid over the life of the loan. Review your loan documentation for total cost of your refinanced loan.
  3. After loan disbursement, if a borrower documents a qualifying economic hardship, we may agree in our discretion to allow for full or partial forbearance of payments for one or more 3-month time periods (not to exceed 12 months in the aggregate during the term of your loan), provided that we receive acceptable documentation (including updating documentation) of the nature and expected duration of the borrower’s economic hardship. During any period of forbearance interest will continue to accrue. At the end of the forbearance period, any unpaid accrued interest will be capitalized and be added to the remaining principle amount of the loan.
  4. Automatic Payment (“AutoPay”) Discount: if the borrower chooses to make monthly payments automatically from a bank account, the interest rate will decrease by 0.25% and will increase back if the borrower stops making (or we stop accepting) monthly payments automatically from the borrower’s bank account. The 0.25% AutoPay discount will not reduce the monthly payment; instead, the discount is applied to the principal to help pay the loan down faster.

Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.

Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.

Interest Rate: A simple annual rate that is applied to an unpaid balance.

Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.

KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

This information is current as of April 29, 2021. Information and rates are subject to change without notice.
 


5 Important Disclosures for Navient.

Navient Disclosures

You can choose between fixed and variable rates. Fixed interest rates are 2.99% – 8.24% APR (2.74% – 7.99% APR with Auto Pay discount). Starting variable interest rates are 1.99% APR to 8.24% APR (1.74% – 7.99% APR with Auto Pay discount). Variable rates are based on an index, the 30-day Average Secured Overnight Financing Rate (SOFR) plus a margin. Variable rates are reset monthly based on the fluctuation of the index. We do not currently offer variable rate loans in AK, CO, CT, HI, IL, KY, MA, MN, MS, NH, OH, OK, SC, TN, TX, and VA.


6 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 5/17/2022 student loan refinancing rates range from 2.05% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.93% Fixed APR with AutoPay.


7 Important Disclosures for PenFed.

PenFed Disclosures

Fixed Rate Loan Terms: 5 years/60 monthly payments, 8 years/96 monthly payments, 12 years/144 monthly payments or 15 years/180 monthly payments. Annual Percentage Rate is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed rates range from 3.29% to 5.43% APR. Rates are subject to change without notice. Fixed APR: Fixed rates will not change during the term. This rate is expressed as an APR. Since there are no fees associated with this loan offer, the APR is the same percentage as the actual interest rate of the loan. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.


8 Important Disclosures for CitizensBank.

CitizensBank Disclosures

Education Refinance Loan Rate Disclosure:  Variable interest rates range from 1.99%-8.38% (1.99%-8.38% APR). Fixed  interest rates range from 2.99%-8.63% (2.99%-8.63% APR).

IS Variable Rate Disclosure:  Variable Rates advertised are based on the one-month London Interbank  Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business  day, of the preceding calendar month. As of December 1, 2021, the one-month LIBOR rate is 0.09%.  Variable interest rates will fluctuate over the term of the loan with changes in the LIBOR rate, and will  vary based on applicable terms, level of degree and presence of a co-signer. Your final variable rate may  be based upon the 30-day average SOFR index, as published by the Federal Reserve Bank of New York.  The maximum variable rate is the greater of 21.00% or Prime Rate plus 9.00%.

ERL Variable Rate Disclosure: Variable interest rates are based on the 30-day average Secured Overnight Financing Rate (“SOFR”) index, as published by the Federal Reserve Bank of New York. As of May 1, 2022, the 30-day average SOFR index is 0.29%. Variable interest rates will fluctuate over the term of the loan with changes in the SOFR index, and will vary based on applicable terms, level of degree and presence of a co-signer. The maximum variable interest rate is the greater of 21.00% or the prime rate plus 9.00%.

Fixed Rate Disclosure: Fixed rate ranges are based on applicable terms, level of degree, and presence of a co-signer.

Lowest Rate Disclosure: Lowest rates are only available for the most creditworthy applicants, require a 5-year repayment term, immediate repayment, a graduate or medical degree (where applicable), and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Rates are subject to additional terms and conditions, and are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.

Federal Loan vs. Private Loan Benefits:  Some federal student loans include unique benefits that the borrower may not receive with a private student loan, some of which we do not offer. Borrowers should carefully review federal benefits, especially if they work in public service, are in the military, are considering possible loan forgiveness options, are currently on or considering income based repayment options or are concerned about a steady source of future income and would want to lower their payments at some time in the future. When the borrower refinances, they waive any current and potential future benefits of their federal loans. For more information about federal student loan benefits and federal loan consolidation, visit http://studentaid.ed.gov/. We also have several resources available to help the borrower make a decision on our website including Should I Refinance My Student Loans? and our FAQs. Should I Refinance My Student Loans? includes a comparison of federal and private student loan benefits that we encourage the borrower to review.
 
Citizens Student Loan Eligibility: : Applicants must be enrolled at least half-time in a degree-granting program at an eligible institution.
 
Loyalty Discount Disclosure: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower or their co-signer (if applicable) has a qualifying account in existence with us at the time the borrower and their co-signer (if applicable) have submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, or other student loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DC, DE, FL, MA, MD, MI, NH, NJ, NY, OH, PA, RI, VA, and VT and some products may have an associated cost. This discount will be reflected in the interest rate disclosed in the Loan Approval Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
 
Automatic Payment Discount Disclosure:Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account three or more times within any 12-month period, the borrower will no longer be eligible for this discount. Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on  their student loans owned by Citizens Bank, N.A. during such time as payments are required to be made and our loan  servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. Discount is not available when payments are not due, such as during forbearance. If our loan servicer is unable to  successfully withdraw the automatic deductions from the designated account three or more times within any 12-month  period, the borrower will no longer be eligible for this discount.