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What To Know About Closing Costs

Noopur Gupta September 14, 2024

What To Know About Closing Costs




Now that you’ve decided to buy a home and are ready to make it happen, it’s a good idea to plan ahead for the costs that are a typical part of the homebuying process. And while your down payment is probably the number one expense on your mind, don't forget about closing costs. Here’s what you need to know.

What Are Closing Costs?

Simply put, your closing costs are the additional fees and payments you have to make at closing. And while they’ll vary based on the price of the home and how it’s being financed, every buyer has these, so they shouldn’t be a surprise. It’s just that some people forget to budget for them. According to Freddie Mac, this part of the homebuying process typically includes: 

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

 Some of these are one-time expenses that are baked into your closing costs. Others, like homeowners’ insurance, are initial installment payments for ongoing responsibilities you’ll have once you take possession of the home.

How Much Are Closing Costs? 

The same Freddie Mac article goes on to say: 

“Closing costs vary greatly depending on your location and the price of your home. Typically, you should be prepared to pay between 2% and 5% of the home purchase price in closing fees.”

With that in mind, here’s how you can get an idea of what you’ll need to budget. Let’s say you find a home you want to purchase at today’s median price of $422,600. Based on the 2-5% Freddie Mac estimate, your closing fees could be between roughly $8,452 and $21,130.

 But keep in mind, if you’re in the market for a home above or below this price range, your numbers will be higher or lower.

Tips To Reduce Your Closing Costs

If you’re wondering if there’s any way to inch that down a little bit, NerdWallet lists a few things that could help: 

  • Negotiate with the Seller: Some sellers are willing to cover part or all of these expenses — especially since homes are staying on the market a bit longer now. Sellers may be more motivated to compromise, and you’ll find you have a bit more negotiation power. So don’t hesitate to ask them for concessions like paying for the home inspection or giving you a credit toward closing costs.
  • Shop Around for Home Insurance: Since rising home insurance is a challenge in many areas of the country right now, take the time to get a clear picture of all your options. Each insurance company offers their own policies and coverage, so get multiple quotes and see how they compare. Choosing a policy that provides reliable coverage at a competitive rate can make a difference.
  • Look into Closing Cost Assistance: Just like there are programs out there to help with your down payment, options exist to get support with closing costs too. While they’ll vary by area, there are programs for various income levels, certain professions, and specific towns or neighborhoods too. If you want to learn more, Experian says:
“Your real estate professional should be able to steer you toward applicable programs, and the U.S. Department of Housing and Urban Development (HUD) maintains a helpful resource for finding homebuying assistance programs in every state.”

Bottom Line

Planning for the fees and payments you'll need to cover when you're closing on your home is important – and it doesn’t have to be a big surprise. With the right experts on your side, you can make sure you’re prepared. Let’s connect so you have someone you can go to for more tips and advice.

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Why Some Homes Sell Faster Than Others Why Some Homes Sell Faster Than Others FacebookTwitterPinterestLinkedIn As you think ahead to your own move, you may have noticed some houses sell within days, while others linger. But why is that? As Redfin says: “. . . today’s housing market has been topsy-turvy since the pandemic. Low inventory (though rising) and high prices have created a strange mix: Some homes are flying off the market, while others sit for weeks.” That may leave you wondering what you should expect when you sell. Let’s break it down and give you some actionable tips on how to make sure your house is one that sells quickly. Homes Are Still Selling Faster Than Pre-Pandemic The first thing you should know is that, in most markets, things have slowed down a little bit. While you may remember how quickly homes sold a few years ago, that’s not what you should expect today. Now that inventory has grown, according to Realtor.com, homes are taking a bit longer to sell in today’s market (see graph below): a graph of a bar chartBut before you get hung up on the ten-day difference compared to the past few years, Realtor.com will help put this into perspective: “In April, the typical home spent 50 days on the market . . . This marks the 13th straight month of homes taking longer to sell on a year-over-year basis. Still, homes are moving more quickly than they did before the pandemic . . .” By this comparison, if your house does take a little more time to sell this year, it’s not really a concern. It’s actually still faster than the norm. Plus, it gives you a bit more time to find your next home, which is welcome relief when you’re trying to move, too. Just remember, some homes sell in less time than this. Some take even longer. So, what’s the real difference? Why do some homes attract eager buyers almost instantly, while others sit and struggle? It comes down to having the right agent and strategy. Here are a few tips you need to know. 1. Price It Right One of the biggest reasons homes sit on the market is overpricing. Many sellers want to shoot for a higher price, thinking they can lower it later – but that backfires by turning buyers away. What to do: Work with an agent to make sure your house is priced right. They’ll analyze recent comparable sales (what other homes have sold for recently in your area), so you know you’re pricing appropriately for today’s market and what buyers are willing to pay. As Chen Zhao, Economic Research Lead at Redfin, explains: “My advice to sellers is to price your home fairly for the shifting market; you may need to price lower than your initial instinct to sell quickly and avoid giving concessions.” 2. Focus on the First Impression A messy yard or a house that needs paint? It’ll turn buyers off. Since buyers decide within seconds whether they like a home, a good first impression is key. What to do: Outside, clean up your front yard, tidy up your landscaping, power wash walkways, and add fresh mulch. Inside, declutter and depersonalize. And consider minor touch-ups like repainting in a neutral tone. Your agent will offer advice on what to tackle. 3. Strong Marketing & High-Quality Listing Photos If your listing or your photos don’t look professional, you could have trouble drawing in buyers who think you’re trying to cut corners. What to do: Instead, lean on your agent’s skills, expertise, and resources. They’ll help you make sure you have: High-resolution listing photos showing the home in its best light. Detailed descriptions that highlight differentiating features of your house. Your listing on multiple platforms, including major real estate sites and social media. 4. The Location of the Home You may have heard the phrase “location, location, location” when it comes to real estate. And there’s definitely some truth to that. Homes in highly sought-after neighborhoods tend to sell faster. What to do: While you can’t change where your house is located, your agent can highlight the best features of your neighborhood or community in your listing. By showcasing what’s great about your area, they can help draw buyers into what life would look like in your house. Bottom Line Homes that sell quickly don’t necessarily have better features – they have better agents and a better strategy. Are you thinking about selling? Connect with an agent to talk about how to get your home sold quickly and for top dollar.

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