Closing Costs: What Are They, And How Much Will You Pay?

Your down payment isn’t all you need to bring to the closing table when you buy a home. Closing costs are expenses beyond the down payment, such as appraisal fees, attorney fees and escrow funds, that you pay on closing day.

First-time home buyers often underestimate just how much they’ll need to pay in closing costs. And some buyers may not even know there are ways to reduce how much they’ll pay.

Let’s go over everything you need to know about closing costs before you finalize your mortgage loan. Then, we’ll walk through a few tips on ways to limit the amount you’ll pay at closing.

What Are Closing Costs On A House?

Closing costs are paid when you close on your mortgage. These costs come about through the process of creating your loan. Closing costs cover the fees for services like your home appraisal and searches on your home’s title. The specific closing costs you’ll need to pay depend on the type of loan you borrow and where you live.

How Much Are Closing Costs?

Closing costs are typically 3% – 6% of the loan amount. This means that if you take out a mortgage worth $200,000, you can expect to add closing costs of about $6,000 – $12,000 to your total cost.

Closing costs don’t include your down payment, but you may be able to negotiate them. Just be aware that your negotiating power can depend heavily on the type of market you find yourself in (like a buyer’s or seller’s market).

Average Closing Costs By State

Below is a state-by-state breakdown of average closing costs, with and without transfer taxes. These averages are based on the average home price for each state.