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Narisara Nami/Getty Images November 03, 2022 Troy Segal is Bankrate's Senior Homeownership Editor, focusing on everything from upkeep and maintenance to building equity and enhancing value. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. Bankrate logo The Bankrate promise
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next. Bankrate follows a strict , so you can trust that we’re putting your interests first. All of our content is authored by and edited by , who ensure everything we publish is objective, accurate and trustworthy. Buying or selling a home is one of the biggest financial decisions an individual will ever make. Our real estate reporters and editors focus on educating consumers about this life-changing transaction and how to navigate the complex and ever-changing housing market. From finding an agent to closing and beyond, our goal is to help you feel confident that you're making the best, and smartest, real estate deal possible. Bankrate logo Editorial integrity
Bankrate follows a strict , so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. Key Principles
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers. Editorial Independence
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. In a real estate transaction, people naturally focus on the immediate, upfront expenses: the home’s purchase price and the down payment (if you’re a buyer); repairs, renovations and improvements to get the home show-ready (if you’re a seller). But before the deal’s done, there are additional expenses to cover — the notorious . Both buyers and sellers typically pay closing costs, and the amount they’ll pay can vary depending on several factors, including the price of the home, the sort of mortgage the buyer has, the professionals involved, and . And also: the details of their particular transaction. While certain closing costs traditionally fall to one party or the other, in home sales — as in many contractural agreements — many things can be open to negotiation. How much are closing costs
There’s no set number when it comes to closing costs. However, the general rule is that between 6 percent and 10 percent of the home’s total purchase price in closing costs, and buyers pay slightly less — around 2 percent to 5 percent of the home’s sale price. While closing costs for sellers are often deducted directly from the home sale proceeds, buyers typically pay their portion out of pocket. So if you for $250,000, your closing costs might range from $5,000 to $12,500. If you’re selling that same home, your costs could be anywhere from $15,000 to $25,000. Unfortunately, you often don’t know the final number until you receive, roughly three business days before closing day, a closing statement or settlement statement, which delineates all the closing costs in black and white. Sellers, though, often get a heads-up earlier, if their agent has prepared a for them — an itemized breakdown of all of the closing costs and an estimate of the sum they will actually receive, or net, after the final is signed. Closing costs for sellers
Sellers and buyers pay different types of closing costs. If you’re , you may be required to pay the following costs. Generally, these expenses will be deducted “off the top” of the home’s purchase price, unless you specifically ask to pay them separately. Realtor commissions: The compensation the buyer’s and seller’s agents get for the home sale. Sellers typically pay both commissions, a percentage of the final purchase price. Title fees: The costs associated with transferring the home’s title from the seller to the new buyer. Homeowners association fees: If the home is in a community with a homeowner’s association (HOA), any outstanding need to be paid at the closing. Property taxes: If there are any unpaid on the home, the seller will be on the hook for bringing those current, as of the amount owed at the time of closing. Closing costs for buyers
Buyers typically pay the following costs, which are usually paid out of pocket at closing. Many of these are connected to obtaining a home loan and are part of your . Attorney costs: Real estate attorneys often review title documents and contracts, and pull together closing documents. They typically charge by the hour, though there may be set fees for certain tasks (like composing the purchase and sale agreement). Home inspection fee: If you choose to have a home inspection to assess the property’s condition, you’ll pay the at the closing table. Appraisal fee: If you’re financing the purchase, your bank will request an , or estimate of the home’s value, as part of the mortgage application process. Underwriting/credit reporting fees: The lender charges you for its expenses in drawing up your loan, including running a credit check and other underwriting steps. Prepaid interest: The amount of interest on your loan that will accumulate between your closing date and when you make your first mortgage payment. Homeowners insurance: Many lenders require you take out a policy, with the first premium payment due at the closing. Title search fee and insurance: Title insurance protects against any future claims against or problems with the home’s title. Lender’s , which covers the mortgage issuer, is usually mandated; buyers can also cover themselves with owner’s title insurance. Closing costs vary depending on loan type
As a buyer with a conventional mortgage, your various fees (see above) will generally constitute between 2 percent and 5 percent of the home’s purchase price. But different loan types have different structures, which means closing costs can vary depending on the type of mortgage you get. A higher amount usually comes into play for buyers who are making a small down payment. In such cases, lenders affix extra charges to the mortgage, as a sort of insurance to protect themselves in case these higher-risk buyers are delinquent or default on their payments. Often these are due when you close on the property. Many federal government-backed loans that require only 3.5 percent down come with one-time funding fees (VA loans) or upfront fees (USDA loans). With , you’ll need to pay a mortgage insurance premium (MIP) at the closing table — equaling 1.75 percent of the total loan amount — along with annual premiums thereafter. If you’re getting a mortgage from a private lender, like a bank or mortgage company, you often have to pay (PMI) if you’re contributing less than the standard 20 percent down payment on the home. Some lenders might require you to make an upfront PMI payment at closing, meaning you pay the full premium amount for the year all at once. Saving money on closing costs
While closing costs are fairly typical, there may be some steps you can take to reduce the total amount you’ll pay. Here are a few strategies for saving on closing costs: Seller concessions: As a buyer, you could negotiate with the seller to pay some of your closing costs (often in lieu of their making home repairs or lowering their asking price). For example, in many states, sellers typically cover the cost of a title insurance policy for new owners. These are often outlined in the initial , or added to it afterwards. Lender (credits) paying closing costs: Your lender may be willing to pay a portion or all of your closing costs if you accept a higher interest rate for your loan. Closing cost assistance: Certain programs, often for low-to-moderate income or , provide grants or loans to help cover closing costs. Bottom line on who pays closing costs
If you’re buying or , chances are good you’ll need to budget for closing costs in addition to your down payment. And while both pay closing costs, it’s common for the two parties to negotiate which cost will be covered by whom. These costs can also vary based on the loan you choose, so it’s important to be aware of that as you shop around for a mortgage. FAQs
Who typically pays closing costs
Both buyers and sellers typically pay closing costs, though the types of costs are typically different. For instance, buyers might pay an appraisal fee, mortgage origination fee, prepaid mortgage interest and homeowners insurance. Sellers often pay real estate agent commissions, title transfer fees, transfer taxes and property taxes.
Do I still pay closing costs if I m paying cash
Yes, you still need to pay closing costs if you’re paying for a home with cash. You won’t need to pay any lender or mortgage fees (obviously), but you’ll be responsible for real estate attorney fees, title and homeowners insurance and the cost of a home inspection.
Do buyers or sellers pay more in closing costs
Sellers typically pay more in closing costs, typically 6 percent and 10 percent of the home’s sale price. Buyers generally pay around 2 percent to 5 percent of the home’s purchase price. But while seller closing costs are often deducted from the proceeds of the home sale, buyers typically pay these costs out of pocket.
Are down payments a part of closing costs
Your down payment is not part of your closing costs. While your down payment is a portion of your home’s purchase price, your closing costs include other expenses like appraisal fees, origination fees, attorney costs, home inspector’s fee, title search and insurance costs. However, the size of your down payment might affect whether you have to have private mortgage insurance on your home loan, and that might have to be paid at closing. SHARE: Troy Segal is Bankrate's Senior Homeownership Editor, focusing on everything from upkeep and maintenance to building equity and enhancing value. Related Articles