Now that you’ve decided to buy a home, it’s important to plan for all the costs involved in the process. While your down payment is likely the biggest expense on your mind, don’t overlook closing costs. Here’s what you need to know.

What Are Closing Costs?

Closing costs are the additional fees and payments you’ll need to make when finalizing your home purchase. They vary depending on the price of the home and how you’re financing it, but all buyers face these expenses. According to Freddie Mac, typical closing costs may include:

  • Application fees
  • Credit report fees
  • Loan origination fees
  • Appraisal fees
  • Home inspection fees
  • Title insurance
  • Homeowners insurance
  • Survey fees
  • Attorney fees

Some are one-time payments, while others, like homeowners insurance, are initial installments for ongoing expenses after you move in.

How Much Are Closing Costs?

Freddie Mac also states that closing costs generally range between 2% and 5% of the home’s purchase price. For example, if you’re buying a home at today’s median price of $422,600, you can expect closing costs between $8,452 and $21,130. These figures will vary based on your home’s price.

Tips to Reduce Your Closing Costs

If you’re looking to minimize these expenses, NerdWallet offers a few strategies:

  • Negotiate with the Seller: Sellers may be open to covering some of your closing costs, especially in a market where homes are staying listed longer. Don’t hesitate to ask for concessions, such as the seller covering inspection fees or offering credits toward closing costs.

  • Shop Around for Home Insurance: Home insurance rates can vary widely. Take time to compare quotes from different providers to find reliable coverage at the best price.

  • Look into Closing Cost Assistance: Many programs exist to help with closing costs, similar to down payment assistance programs. These options vary by location and may be available based on income, profession, or specific neighborhoods. Your real estate agent can guide you toward applicable programs, and the U.S. Department of Housing and Urban Development (HUD) provides resources to help find assistance in every state.

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Planning for closing costs is crucial when buying a home, and with the right preparation, they don’t have to be overwhelming. For more advice and support, work with a trusted member of our real estate team and an experienced lender.