Closing Costs Explained: What Buyers Should Budget For

The down payment is only part of the cash you need to buy a home. Closing costs are the fees and prepaid items due at the closing table, and they vary with the loan, the property and the town.

Common categories

• Lender fees, such as the origination or underwriting fee, credit report and appraisal
• Title search and title insurance
• Attorney fees
• Recording fees and, depending on the state and the deal, transfer or conveyance taxes
• Prepaid items, including homeowner's insurance, property taxes and any escrow deposit
• Inspections and other reports you order during the process

Get the numbers early

After you apply for a mortgage, your lender must give you a Loan Estimate within three business days, and a Closing Disclosure at least three business days before closing. Compare the two carefully, and ask about any fee that grew or that you do not recognize.

Ask who pays what

Customs about who pays certain taxes and fees differ by area and can be negotiated in the purchase contract. Your agent will explain what is typical and what is worth asking for.

Plan for after closing

Also set aside money for moving, immediate repairs and furnishing. A cushion keeps a new home from becoming a stress.

Want a realistic budget before you start searching? Talk to us about what to ask your lender. This article is general information, not legal or financial advice.