The Homebuyers and Sellers Guide to Closing Costs
For both homebuyers and sellers, the closing costs are the last piece of the puzzle. These costs move the sale along, and they can be very different depending on your location, usually falling between 2 to 7 percent of the home’s total price. Obviously, that’s a pretty wide gap, especially if you’re buying an expensive home.
But luckily, it is customary for both the homebuyers and the sellers to pitch in and pay the closing costs, with the buyer taking the bulk of the cost (about 3 to 4 percent) compared with the seller’s 1 to 3 percent.
While some of these fees are paid when the home inspection happens, the majority of them have to be paid when it is finally time to close on the home and trade keys.
Here’s what you need to know about closing costs for homebuyers and sellers
What Do Homebuyers Actually Pay in Closing Costs?
The reason the buyer pays most of the costs is because those fees are usually used to pay to set up the mortgage. On the rare occasion you pay cash for the house, you won’t have to pay quite as many closing costs. However, there will still be some left over.
Here are some of the closing costs that homebuyers can expect to pay.
- Loan obligation fee, a fee that pays for the work done to process all the paperwork associated with your loan
- Credit report fee, which is used to pay for running your credit report
- Underwriter fee, which goes to the person who assesses your credit
- Home inspection fee, which goes to the person who checked the home for any major problems just as structural issues and working pipes
- Title search fee, which goes to pay for looking for any liens that may stop you from taking ownership of the house
- Survey fee, if you bought a townhome or a single-family home (not used for condos)
- Stamp taxes on money that came from your home loan
What Do Sellers Actually Pay in Closing Costs?
As previously mentioned, sellers usually pay less in closing costs. This list goes through the ones that sellers are usually responsible for paying.
- Closing fee, which goes to the attorney’s office or title company where the big closing meeting happens
- Taxes, paid on the home sale
- Attorney’s fees, if the seller decided to hire one
- Transferring fee, which puts the title in the name of the new owner
It may look like homebuyers have to pay most of the major closing costs, but don’t think sellers get off completely free. In most cases, it is the seller’s job to pay the commission fees for the real estate agent. That usually comes to anywhere between 4 to 7 percent of the home’s final price.
Why the Variation?
There’s no real reason why closing fees vary so much from state to state. The simple answer is that most towns, cities and municipalities have different laws and legal requirements as well as fees for the sale of the home.
You can use online calculators to estimate what your closing costs will be. Three days before the closing date, you will receive a closing disclosure from your lender. That will show you what you’re being charged and why. Look it over and make sure nothing looks out of place.