You saved up your deposit and agreed on a price for your ideal property. But now, you’re looking at another bill – and it’s a big one.
Every real estate transaction comes with closing costs, which cover a long list of fees related to processing your mortgage.
What’s the average closing cost on a house? Find out right here.
What Are Closing Costs?
You know how much you agreed to pay for your property. So, what are all the other costs tacked on at the end? These are called closing costs, and they represent the fees associated with buying and selling a house. Your closing costs may include:
- Loan origination fees
- Appraisal costs
- Title searches and insurance
- Deed-recording fees
These fees are unavoidable, and you pay them when the seller transfers the title of the property to you, the buyer. However, you can work out a deal where the seller pays the closing costs. The best realtor near you can help you negotiate that kind of deal.
The good news? Your closing costs won’t be a surprise. The Real Estate Settlement Procedures Act (RESPA) requires your lender to provide an estimate of the potential closing costs within three days of getting your mortgage application. You get the official bill three days before closing.
What’s the Average Closing Cost on a House?
Now you know what closing costs are and who pays them. So, what can you expect to spend on closing costs?
In most cases, your closing costs make up a small but significant percentage of your total purchase price. What’s the average closing cost on a house? It’s typically between 2% and 5%, depending on your state’s requirements. According to a survey from ClosingCorp, the average amount spent on closing costs is $4,876.
Areas in the Northeast of the country typically see the highest closing costs. The Southeast and Midwest usually pay less, which makes sense given the lower purchase prices in states like Iowa and South Dakota as opposed to New York and Washington D.C.
Why? It’s because a considerable amount of your closing costs will be your loan origination fee, which is usually 1% of what you borrowed.
Can You Lower Your Closing Costs?
Closing costs add thousands to the cost of buying a house. They need to be paid, but you do have a way to lower or even get out of them (at a cost).
Closing costs are always negotiable, even if not all fees can be discharged. Because you have an estimate after applying for the loan, you have room to maneuver. You can do things like:
- Negotiate a no-closing cost mortgage
- Shop around
- Negotiate origination fees
- Look for loyalty discounts
- Ask your VA or union for discount information
No matter what, there’s no reason to simply accept the bill! So ask around to learn how you can save.
Always Remember Closing Costs are Negotiable
What’s the average closing cost on a house? It’s usually a small percentage of your total price, but more importantly, closing costs are negotiable. With the help of a great realtor and a willingness to shop around, you can score yourself a great deal and save thousands on fees.
Are you getting ready to buy a house? You’ll find everything you need to know about the closing cost on a house and more in my Home Life archive.