Saving for a home can feel like aiming at one big number: the down payment. Then, as closing gets closer, a whole collection of other costs suddenly seems to join the conversation. Closing fees, insurance, taxes, prepaid expenses, deposits — it can feel like everyone wants a little piece of the checkbook right before you get the keys. Knowing about those costs ahead of time can make closing day feel a lot less stressful and help you keep some financial breathing room for life in the new home.
A general planning estimate is that buyer closing costs often fall around 2% to 5% of the purchase price, although your actual costs will depend on the home, loan, location, and transaction. And because that is generally separate from your down payment, it’s worth understanding the different places your money may need to go.
MORTGAGE-RELATED COSTS
- Loan origination or underwriting fees, when charged
- Application or credit-related fees, when charged
- Appraisal fee
- Discount points if they’re part of the financing option you choose
- Upfront mortgage insurance or guarantee fees when applicable
- Prepaid interest
PROPERTY & PREPAID COSTS
- Property-tax adjustments or escrow deposits
- Homeowners insurance premiums or escrow deposits
- HOA or condominium charges when applicable
- Survey costs when needed
- Other expenses specific to the home or community
TITLE, RECORDING & SETTLEMENT COSTS
- Title search and title insurance depending on the transaction and local practice
- Recording fees
- Transfer taxes where applicable
- Settlement, escrow, closing-agent, or attorney fees where applicable
THE OTHER COSTS OF GETTING HOME
Not everything you spend during a home purchase waits until closing. Inspections, movers, deposits, repairs, and a few unexpected expenses can arrive along the way. I like to keep those separate in the budget because there’s nothing enjoyable about getting the keys and realizing every available dollar went toward getting through the door.
BUYER-BROKER COMPENSATION
If you’re working with a buyer’s agent, your written agreement should explain the services you’ll receive and how the brokerage will be compensated. Those compensation terms are negotiable. Depending on the agreement and transaction, you may be responsible for some or all of the amount, or it may be negotiated from another source as part of the purchase. I want you to understand that early, while we still have time to plan around it — not when you’re three days away from closing.
Early in the process, a closing-cost calculator such as the one at NerdWallet can help you get a general sense of what to expect.
Once you apply for your mortgage, your lender will give you a Loan Estimate showing much more specific information about the loan and projected costs. For most mortgages covered by the federal disclosure rules, that document is generally provided within three business days after the lender receives your application.
Then, as closing approaches, you’ll receive a Closing Disclosure, generally at least three business days before closing. Take the time to read it. Compare it with the Loan Estimate. Ask about anything that changed or doesn’t make sense.
The “Cash to Close” section brings everything together — the remaining down payment, closing costs, deposits you’ve already made, credits, and other adjustments — so you can see how the amount you’re expected to provide was calculated.
PLEASE BE CAREFUL WITH WIRING INSTRUCTIONS: Criminals can create extremely convincing emails and messages involving real estate funds. Never send money simply because an email tells you where it should go. Independently verify the instructions with the appropriate closing professional using a trusted phone number. If anything changes unexpectedly, stop and make another call before sending funds.
Your lender and closing professional will tell you which form of payment is acceptable and exactly when the funds need to arrive.
And please leave yourself a cushion after closing. There will be moving supplies, food, utility setup, maybe curtains that suddenly become essential at 9:00 at night, and probably at least one trip to the hardware store you didn’t plan on. This guide to moving supplies may help with some of that planning.
There are a lot of numbers involved in buying a home, but you shouldn’t have to feel alone trying to make sense of them. I’ll help you know what’s coming, point you toward the right person when a question belongs with your lender or closing professional, and make sure you have time to understand the costs before closing day arrives.
Getting the keys should feel like the beginning of homeownership — not the moment you discover what it cost to get there.