How Much More Money Will You Need to Close a Home?

If you’ve ever purchased a home, you were probably surprised at the number of fees applied to the closing process. While some of them may be “baked” into the loan itself, most fees are paid at closing in order to facilitate recording the deed and transferring title, and can add up to thousands of additional dollars. Just where does that extra money go?

Many buyers often believe that all they need to purchase a home is the down payment for the mortgage. However, you should plan on having an additional 2-8% of the home’s purchase price available for required closing costs, so you are not blindsided just before closing. Some closing costs and fees you may need to pay to finalize a real estate transaction include:

MORTGAGE-RELATED FEES

• Loan underwriting fee
• Application fee
• Appraisal fee
• Mortgage points, if buying down an interest rate
• Mortgage insurance
• Prepaid interest to the end of the month

PROPERTY RELATED FEES

• Prorated property taxes and HOA fees
• Prepaid homeowners insurance premium
• Inspections for pests, electrical systems, mildew, etc.
• Land/Lot survey (if required by the lender)
• Transaction Fee (from brokerage)

RECORDING, TAX, & LEGAL FEES

• Title insurance
• Recording fees
• Transfer tax (in some states and localities)
• Closing agent and/or attorney

POTENTIAL BUYER BROKERAGE COMMISSION
The concept of buyer agency is not new, but how buyer’s agents are compensated has evolved following the 2024 National Association of REALTORS® (NAR) settlement agreement with the Department of Justice (DOJ). These changes, which took effect on August 17, 2024, emphasize transparency and strengthen the agent’s fiduciary duties to the buyer. Today, a signed Buyer Agency Agreement is standard practice for most agents before they can show properties. Brokerage fees are fully negotiable and discussed transparently up front—sometimes still covered by the seller through concessions. 

You can obtain an estimate of the amount of cash that will be needed to close by using a closing cost calculator at NerdWallet. After you actually apply for a mortgage, the lender will estimate your projected closing costs and other details in a Loan Estimate document like this sample version, which should be a more accurate figure. You should always receive a Loan Estimate from your lender within three business days after applying for a loan.

In the days before your closing, the lender will provide another document called the Closing Disclosure as a final summary of all your closing costs. The “Cash to Close” section will show the amount of earnest money deposit already collected and the balance of the down payment needed for the closing. This is the exact amount you will need to bring to closing, including the mortgage down payment and any additional lender fees, less the earnest money deposit and other credits.

Depending on the mortgage type, the down payment can range from 0% – 20% of the purchase price. However, even if no down payment is required for the mortgage, you will still likely need to bring a cashier’s check or send a wire transfer to cover the additional closing costs.

Remember, you should always verbally confirm with your real estate agent and/or the title/closing/escrow company the wire transfer instructions to avoid fraudulent requests and mistakes in routing or account numbers. If you have any additional questions about which closing costs you might need to consider, don’t hesitate to reach out to me directly.

Last but not least, remember to keep some cash available for meals, tips, and any moving supplies you may have misplaced. If you have any questions about your closing costs, don’t hesitate to reach out directly to me.