Closing costs are usually an unavoidable part of buying a home. While there are ways to reduce some closing costs and fees, they are an expense you will likely have to consider when it comes time to save for a home.

On average, buyers can expect to pay between 2 and 5 percent of the purchase price in closing costs and fees.

In this article, we’re going to break down those costs and talk about some ways to plan for, or limit, the fees associated with closing on a home.

A breakdown of closing costs

Most closing costs in a real estate transaction are paid for by the buyer. When getting approved for a mortgage, your lender is required to provide you with an estimate of the closing costs. This is called a “Closing Disclosure statement” which overviews the details of your loan.

Different lenders will charge varying amounts in fees. Some are even willing to waive certain fees. But, we’ll discuss that later.

For now, let’s focus on the closing costs buyers typically have to pay:

Credit Report for Bank — lender will charge the borrower for the cost of confirming their FICO Score and credit-worthiness

Lender Document Preparation/Underwriting – preparing the note, mortgage, disclosure statements, etc.; this fee can vary greatly by lender

Appraiser’s Fee (Appraisal is required for a home loan) – lender will require that a third-party appraiser confirm the fair market value of the home before agreeing to lend the purchase price.

Title Insurance Policy for Lender (the bank will require that the borrower pay for lender's title insurance on the property, this is a separate policy from the title insurance that the seller buys for the buyer (Owner's Title) & title insurance endorsements

Flood Certification (to determine if the property is in a flood zone) minimal fee -typically $15-$25

Recording fees - fees for legally recording the new deed and mortgage

Prorations for real estate taxes and home owners association/cdd fees - the buyer and seller each pay their share 

These are just some of the many fees that can be due upon closing on a home. Depending on where you live, which lender you choose, and the type of mortgage you secure, your closing costs will vary, so it’s a good idea to shop around for a lender and mortgage type with reasonable closing costs.

Seller Fees - typical seller fees as follows:

Some lenders offer no-cost, or low-cost mortgages. However, these savings often come with a higher interest rate which, over the lifespan of your loan, can cost you more in the long run.

You should also be aware of the different loan types that you may be eligible for. FHA loans, USDA loans, and VA loans are all designed for buyers hoping to make lower down payments on their home.

Each loan type provides different amounts due at closing. Fortunately, your mortgage lender will be able to give you an estimate of costs for each loan type.

Want to get an estimate of the closing costs you’ll have to pay when you buy a home? You can use this online calculator to see an average.