What Costs Are Added When Closing on a House?

When you buy a home, the sale price isn’t the only figure you need to consider—and even the seller has some expenses they need to keep in mind. There are several additional costs, known as closing costs, that can significantly impact the final amount you pay. These expenses can range from 2% to 5% of the home’s purchase price and vary depending on the specifics of your home purchase, lender, location, and more. Keep reading for a breakdown of some of the common costs that come with the closing process.

Realtor Commissions

Realtor commissions are one of the largest costs when closing on a house. Typically, the seller is asked to pay the commissions for both the buyer’s and the seller’s agents. These fees are usually between 5% and 6% of the home’s sale price, and that amount is split between the 2 realtors. While this may not be a direct cost for the home buyer, sellers may factor this expense into the final asking price of the home, or may opt to only pay their own realtor’s commission if they believe the buyer’s offer is too low.

Loan Origination Feeds

If you’re financing your home with a mortgage (and most people are), the lender will charge a loan origination fee. This is usually between 0.5% and 1% of the loan amount. This covers the lender’s administrative costs in processing the mortgage. Sometimes, a lender might negotiate this fee or roll it into the loan, but it’s still an expense to plan for as a buyer.

Home Appraisal and Inspection Fees

Before closing, most lenders require that the home be inspected and appraised to ensure the property’s value matches the loan amount. This helps to protect their investment in the property by ensuring that if the buyer doesn’t repay the loan, the sale of the property will cover the loaned amount. Appraisal fees vary from $300 to $500, depending on the size of the home. An inspection usually costs about the same amount, but is well worth it, as it also protects you as the buyer from any hidden issues with the home.

Property Taxes and Insurance

Property taxes and insurance are an ongoing expense for the homebuyer, but it’s also a cost to consider at closing. At this time, buyers are often required to pay a portion of the property taxes and homeowners insurance upfront. Depending on the time of year, this could amount to several months’ worth of tax and insurance payments.

A realtor in Overland Park can tell you more about these kinds of costs and how much you can expect to pay at closing.