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Typical Closing Costs for Buyer: Who Pays for What and Why?

Typical Closing Costs for Buyer: Who Pays for What and Why?
Typical Closing Costs for Buyer: Who Pays for What and Why?
Brian Reese
May 13, 2023

What are the typical closing costs for buyer?

Who pays the fees?

The buyer, the seller, or the lender?

Awe yes, very important questions, which we’ll answer in this high-value blog post!

Closing costs for homebuyers are the fees and expenses that are due at the end of a real estate transaction, typically when you close on the purchase of a property.

The amount of closing costs will vary depending on several factors, including the location of the property, the purchase price, and the type of financing used.

What are Closing Costs for Homebuyers?

What are Closing Costs for Homebuyers

Closing costs are paid at the final closing of your mortgage, normally when the loan has been funded and all the paperwork has been signed.

Think of closing costs as: “the fees and expenses for generating your loan.”

Closing costs cover a wide range of fees and expenses.

The specific closing costs for buyers depend on the type of loan and where you live by state.

What are the Typical Closing Costs for Buyer?

What are the Typical Closing Costs for Buyer?

The typical closing costs for buyers range from 3% to 5% of the total loan amount.

This means that if you get a $500,000.00 mortgage loan, you can expect to add closing costs of about $15,000.00 to $25,000.00 to your total cost.

Note: Closing costs do not include your down payment, but keep in mind, you may be able to negotiate them.

However, your power to negotiate fees and expenses depends on the type of market you find yourself in, as well as the expertise you have on your side—don’t go at it alone!

Did you know you can also negotiate seller concessions?

We can help, click HERE to speak with a mortgage expert for free (get an answer within 2 business hours).

List of 27 Possible Closing Costs for Buyers

27 Possible Closing Costs for Buyers
  • Application Fee: Lenders are allowed to charge an application fee to process your loan. This fee varies by lender but can be up to $500.00. This may be a separate fee, or it can be used as a deposit toward final closing.
  • Closing Fee: Your closing fee goes to the escrow company or the attorney who facilitates the final closing. Some states require an attorney to sign off on every closing. These costs vary depending on your state and whether an attorney must attend your closing.
  • Discount Points: Lenders will allow you to pay money up-front on your loan to reduce your interest rate by buying discount points (you can buy down your interest rate by putting more money down, saving you money on the interest over time). One discount point equals 1% of your loan amount. For example, if you get a mortgage for $500,000.00, one point will cost you $5,000.00. Note this is a completely optional fee. Fees paid up-front for discount points will show on your Loan Estimate under “origination charges.”
  • FHA Mortgage Insurance: With an FHA loan, you’ll need to pay a mortgage insurance premium at final closing. The current mortgage insurance premium rate is 1.75% of the base loan amount. For example, if you borrow $400,000.00 to buy your home, your MIP due at closing is $7,000.00. Note: This up-front payment rate is separate from your monthly MIP, which ranges from 0.15% to 0.75% of your loan value.
  • Flood Certification: You can expect to pay $15.00 to $25.00 for a flood certification. This money goes to FEMA, which uses the data to plan for flood emergencies in high-risk zones. This closing cost only applies if you buy a house in a flood zone.
  • Homeowners Association Transfer Fee: If the property is part of a homeowner’s association, your homeowner’s association transfer fee covers the cost of moving HOA fees from the seller to the buyer. If the property is not part of an HOA, you won’t pay this fee.  
  • Lead-Based Paint Inspection: Homes built prior to 1979 might have lead-based paint. Lead-based paint poses a significant health risk according to numerous medical research studies. This fee covers the lead-based paint inspection test and report. You can expect to pay around $300.00 for a lead-based paint inspection.
  • Rate Lock Fee: Some lenders may charge a fee to lock in your interest rate between the mortgage pre-approval and the final closing. If this fee applies, expect to pay 0.25% to 0.50% of your total loan value when you lock in your final rate. Note: Many lenders offer this service for free depending on the length of the rate lock.
  • VA Funding Fee: If you’re using a VA home loan, you may need to pay a “VA funding fee” at final closing. Your VA funding fee goes toward administrative costs for the VA loan program. The amount of the funding fee is based on the down payment, whether it’s a purchase or refinance, and whether it’s the first time you’ve used your VA benefits. If you put down less than 5% on your loan and you’re a first-time VA user, your VA funding fee is equal to 2.15% of your total loan value. A 5% down payment lowers your fee to 1.5%, and a 10% down payment lowers your fee to 1.25%. The last two are the same regardless of whether it’s your first time or your 10th. If you’re refinancing from a different type of loan into a VA loan, the funding fee is 2.15% if it’s your first use and 3.3% for a subsequent use. VA Streamlines (also called Interest Rate Reduction Refinance Loans, or IRRRLs) have a 0.5% funding fee. The funding fee can be waived if you have a VA disability rating of 10% higher or you’re applying as a surviving spouse of a veteran who died while in service or because of a service-related disability. If you’re a Purple Heart recipient serving in an active-duty capacity, you’re also exempt from the funding fee.
  • Transfer Tax: Transfer taxes go to your local government in exchange for updating your home’s title and transferring it to you. The transfer tax fee varies depending on where you live.
  • Private Mortgage Insurance (PMI): Your lender requires private mortgage insurance (PMI) if you put less than 20% down at final closing on a conventional loan. PMI protects the lender if you default on your loan. Your lender might ask you to put down your first month’s PMI premium when you close. The exact amount you’ll pay for PMI depends on your lender, but most homeowners pay $30.00 to $70.00 each month for every $100,000.00 they borrow. With a conventional loan, you also can pay for part or all a PMI policy upfront at closing in order to have lower or no monthly fees for mortgage insurance. With an FHA loan, you’ll have an up-front mortgage insurance premium plus a monthly MIP fee for the life of the loan unless you make a down payment of 10% or more.
  • Loan Origination Fees: These fees are charged by lenders for processing and underwriting your mortgage application.
  • Appraisal Fee: The fee charged by a professional appraiser to determine the value of the property.
  • Home Inspection Fees: The fee charged by a home inspector to assess the condition of the property and identify any potential issues.
  • Credit Report Fee: The fee charged by the lender to obtain a copy of your credit report.
  • Title Search and Insurance Fees: The cost of researching public records to ensure that the property title is clear and transferable, and the cost of title insurance that protects the buyer and lender against any claims or disputes over the property title.
  • Escrow Fees: The fees charged by the third-party service that handles the transfer of funds and documents between the buyer, seller, and lender.
  • Property Taxes: Depending on the timing of the purchase, the buyer may need to pay a prorated portion of the property taxes for the year.
  • Homeowners Insurance: The cost of homeowners insurance that is required by lenders to protect the property and the lender’s investment.
  • Recording Fees: The fees charged by the local government to record the transfer of the property title and mortgage documents.
  • Prepaid Interest: Depending on the timing of the purchase, the buyer may need to pay a portion of the interest on the mortgage loan for the period between the closing date and the first mortgage payment.
  • Survey Fee: The fee charged by a professional surveyor to determine the property boundaries and any encroachments.
  • Pest Inspection Fee: The fee charged by a pest inspector to assess the property for any pest infestations or damage.
  • Notary Fees: The fees charged by a notary public to notarize and certify documents.
  • Attorney Fees: The fees charged by an attorney to review the closing documents and ensure that the buyer’s interests are protected.
  • Courier Fees: The fees charged to deliver documents between the buyer, seller, and lender.
  • Home Warranty Fees: The optional fee charged by a home warranty company to provide coverage for certain home systems and appliances.

Overall, the closing costs for a buyer typically range from 2% to 5% of the purchase price of the property. It’s important to carefully review the closing costs with your lender and real estate agent to ensure that you understand all the fees and expenses involved in the homebuying process.

What are the Average Closing Costs for Buyers by State? (2023-2024)

Average Closing Costs for Buyers by State

Below is a state-by-state breakdown of average closing costs, with and without transfer taxes.

These averages are based on the average home price for each state.

StateClosing costs for home purchase (with taxes)Closing costs for refinancing (with taxes)
New Hampshire$8,183$2,283
New Jersey$7,915$4,963
New Mexico$3,513$2,693
New York$16,849$10,084
North Carolina$3,406$2,660
North Dakota$2,501$2,067
Rhode Island$5,568$2,037
South Carolina$3,447$3,009
South Dakota$3,105$2,388
District of Columbia$29,888$3,370
West Virginia$3,406$3,370

Conclusion: What Buyers Can Expect to Pay in Closing Costs

What Buyers Can Expect to Pay in Closing Costs

Generally, buyers can expect to pay closing costs in the range of 3% to 5% of the total loan amount.

This means that if you get a $500,000.00 loan, you can expect to add closing costs of about $15,000.00 (3%) to $25,000.00 (5%) to your total loan cost.

You have the power to negotiate fees and expenses, so work with a loan expert who can help!

Did you know you can also negotiate seller concessions?

Click HERE to speak with a mortgage expert for free (you’ll get an answer within 2 business hours).

Want Expert Help With Your Purchase or Refinance Loan?

Josh Rapaport and Brian Reese owners of District Lending

You’ve got questions.

We’ve got expert answer!

If you’re thinking about a purchase or refinance mortgage, or if you have questions about getting the best interest rate, obtaining jumbo loan financing, or any other questions about what loan products you may qualify for, you can get in touch with us HERE.

>> Click HERE to get a great low mortgage rate in 60 seconds or less!

About the Author

Brian Reese District Lending

Brian Reese is a senior advisor and co-owner at District Lending. He is one of the world’s leading experts in veteran benefits, having helped millions of veterans secure their financial future since 2013. Brian is the founder VA Claims Insider, an education-based Coaching & Consulting company whose mission is to educate and empower veterans to get the VA disability benefits they’ve earned for their honorable service. A former active-duty air force officer, Brian deployed to Afghanistan in support of Operation Enduring Freedom. He is a distinguished graduate of management of the United States Air Force Academy and earned his MBA as a National Honor Scholar from the Spears School of Business at Oklahoma State University.

In Brian’s Own Words:

“As a military veteran, I’ve made it my life’s mission to help people live happier and wealthier lives. District Lending brings this mission to life. We believe in integrity, honesty, and transparency, which is why you’ll see our rates right on our website. You’ll find lower rates and zero lending fees, which means you can buy your dream home for less. The savings are passed on to you — the way it should be.”

– Brian Reese, Advisor and Co-Owner, District Lending

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