Budgeting for closing costs

When you buy a home, in addition to the down payment, you’ll need to consider closing costs. They can include title insurance, attorney fees, appraisals, taxes and more. Closing costs vary and may be affected by the price of the home, your lender’s requirements and other factors. We’ve put together a guide, based on a conventional mortgage, to help you get a sense for what to expect, but be sure to talk to your lender about specifics.

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2–5% of sale price


Buyers pay $3,700 in closing costs on average

Source: Zillow, 2015


Your down payment, state, loan term and the cost of your home

An example of what makes up your closing costs

Appraisal and survey fees

Fees vary but are usually several hundred dollars.

Homeowners insurance

The first year is generally paid at closing.

Property tax

Usually, 6 months of advance tax is paid at closing. Taxes vary by location.

Closing or escrow fee

This is calculated based on purchase price.

Title insurance

Policies for both the buyer and lender are calculated based on the purchase price.

Processing and underwriting fees

These fees vary and go to your lender.

Miscellaneous fees

A number of smaller fees may also be included at closing, from the cost of a credit check to the cost of registering your purchase with the local government. If you hire an attorney, his or her fees will generally be bundled into your closing costs as well.

Sources: Zillow, Consumer Financial Protection Bureau

How to estimate your closing costs

A closing cost calculator, like this one from Bank of America (link: https://www.bankofamerica.com/home-loans/mortgage/closing-costs-calculator.go), can help you estimate the amount you’ll want to budget for.

If you’ve already started the mortgage process, you will receive a loan estimate (LE) several days after submitting an application. Your lender is required by law to give you this document.

If you have questions or something doesn’t add up in your LE, ask your lender or attorney right away. You want to avoid surprises. Prior to closing your loan, you’ll receive your final closing disclosure listing your final closing costs. You should recognize many of these costs from your original LE.

Once you’ve determined your closing costs, check with your closing agent about what type of payment is acceptable; generally, you’ll be asked to pay via cashier’s check.

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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.

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