Average closing costs for the buyer run between about 2% and 6% of the loan amount. That means, on a $300,000 home loan, you would pay from $6,000 to $18,000 in closing costs in addition to the down payment. After you apply for a mortgage, the lender will outline the projected closing costs along with other details in a loan estimate document. You should receive the loan estimate within three business days after applying.
In the days before the closing, the lender will provide a final summary of the closing costs in a Closing Disclosure document. Review these documents closely and ask questions about anything you don’t understand.
Meanwhile, you can use a closing costs calculator to estimate how much you'll pay.
Who pays the closing costs
Most of the closing costs fall on the buyer, but the seller typically has to pay a few, too, such as the real estate agent’s commission and often a real estate transfer tax.
» MORE: What are the closing costs for the home seller?
Buyers can also ask sellers to pay some of their closing costs. When the seller agrees, it's called a seller concession. The seller is more likely to contribute if there are more homes for sale than would-be buyers in the local market, or the property has issues that make it challenging to sell. Your real estate agent can help you decide the best negotiating strategy.
Seller concessions
Lenders place limits on how much sellers can contribute toward the buyer's closing costs, depending on the type of loan. Here are the maximum amounts:
If the buyer will live in the home:
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Up to 3% of the sale price or the home's appraised value, whichever is less, if the buyer's down payment is less than 10%.
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Up to 6% if the down payment is between 10% and 25%.
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Up to 9% If the down payment is 25% or more.
If the home is an investment property, the limit is 2%, regardless of the down payment.
FHA loan: up to 6% of the sales price.
USDA loans: up to 6% of the sales price.
VA loan: up to 4% of a home loan.
Appraisal fee
The lender orders a home appraisal to make sure the loan amount doesn't exceed the property value. The fee varies by property, region, and type of loan. Cost estimate: $500-$800.
Encompass Lending Group is part of the Fathom Realty family. Get up to $750 with an appraisal credit.
Discount points
Discount points are optional fees you pay upfront to lower the interest rate. Cost: One discount point equals 1% of the loan amount and typically reduces the interest rate by a quarter of a percentage point.
Loan-origination charges
The lender charges fees to cover the cost of underwriting and processing your loan. They may include an application fee, an underwriting fee, or lender "points." Cost estimate: About 1% of the loan amount.
Pest inspection
In some areas, lenders require a termite inspection or a wood-destroying insect organism report. This is separate from a general home inspection, which usually isn't required but is highly recommended. Cost estimate: $150.
Paying for closing costs
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