how to reduce closing costs

How much are closing costs? These fees, paid to third parties to help facilitate the sale of a home, typically total 2% to 7% of the home’s purchase price. So on a $250,000 home, your closing costs would amount to anywhere from $5,000 to $17,500.

Now that you have a sense of the ballpark numbers, here’s everything home buyers and home sellers need to know about closing costs.

Who pays closing costs, and when?

Both buyers and sellers typically pitch in on closing costs, but buyers shoulder the lion’s share of the load (3% to 4% of the home’s price) compared with sellers (1% to 3%). And while some closing costs must be paid before the home is officially sold (e.g., the home inspection fee when the service is rendered), most are paid at the end when you close on the home and the keys exchange hands.

How much are closing costs for buyers?

Home buyers pay the majority of closing costs since many of these fees are associated with the mortgage.

“If you’re paying cash for a property, there are still a few closing costs, but they are significantly less,” says Cara Ameer, a Realtor® in Ponte Vedra, FL.

Here are some of the fees home buyers should brace themselves to pay:

  • A loan origination fee, which lenders charge for processing the paperwork for your loan.
  • A fee for the underwriter, who assesses your credit worthiness.
  • A fee for the appraisal of the home you hope to own to make sure its value matches the size of the loan you want.
  • A fee for the home inspection, which checks the home for potential problems from cracks in the foundation to a leaky roof.
  • A fee for a title search to unearth any liens on the property that could interfere with your ownership of it.
  • A survey fee if it’s a single-family home or townhome (but not condos)
  • Taxes, also called stamp taxes, on the money you’ve borrowed for your home loan.

How much are closing costs for sellers?

Here are the closing costs that sellers are typically responsible for:

  • A closing fee, paid to the title company or attorney’s office where everyone meets to close on the home.
  • Taxes on the home sale.
  • A fee for an attorney, if the home seller has one.
  • A fee for transferring the title to the new owner.

While this doesn’t seem like much compared with what home buyers have to cough up, keep in mind that sellers typically pay all real estate agents’ commissions, which amount to 4% to 7% of the home’s sales price. So, no one sneaks through a home closing scot-free.

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