Buyer Closing Costs - What Are They & How Much Do They Cost?

There are a lot of questions, particularly when it comes to first-time home buyers, about what closing costs are and how much they cost. Closing costs for a home buyer are essentially the cost associated with closing on your new home loan. Buyer closing costs are typically anywhere between 2%-4% of your loan amount, and are paid in addition to your downpayment on your home. For example, if you are purchasing a $300,000 home and are financing $280,000 of that purchase, your closing costs would be anywhere between $5,600 and $11,200. As you near closer to your closing date, your lender will give you a more detailed estimate of your closing costs and how much you will need to bring to the table on closing day.

Below is a very easy to digest list of the particular items that are included in closing costs. These items will also be broken down by your lender when the send you the detailed estimate of your closing costs.

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1. Lender Fees
   This is a percentage of the loan amount charged by the lender to a borrower to process, approved, and provide the loan to the borrower

2. Appraisal Fees
   An appraisal fee covers the cost to have an appraiser estimate a home's market value.
   This is typically paid for at the time of service and are about $500ish, but you will see it outlined on your loan estimate

3. Recording Fees
   Recording fees are charged by state and local agencies for registering a property's transfer of ownership.

4. Title Insurance
   Lender's title insurance ensures there is nothing wrong with the title to your property- such as someone with a legal claim against the home
   The lender will factor this into your closing costs, it is not something you need to shop around for

5. Attorney Fees
   Typically between $550-$600

6. Tax Escrow Reserves
   The escrow/reserves is calculated based on the number of months before the next tax bill is due against the number of months the lender will have collected through the mortgage payments from the date of closing.

After all is said and done, your cash to close to bring to the closing table will be a combination of both your closing costs (a good estimate of your closing costs is anywhere between 2%-4% of your loan amount) + your downpayment.