What Are Closing Costs? A Friendly Guide for Home Buyers

Hey there! If you're in the process of buying a home, congratulations! Now, let’s talk about something that often surprises first-time buyers—closing costs. Yep, it’s not just about the down payment. There are extra fees that come into play when you close on a home. But don’t worry, I’m here to break it down in a way that’s easy to understand and stress-free.

What Exactly Are Closing Costs?

In a nutshell, closing costs are the fees and expenses you pay to finalize your mortgage and officially take ownership of the home. These fees are paid to your lender, real estate agent, and other parties involved in the transaction. So yes, it’s a team effort!

Some of these costs go towards property expenses, others cover the loan application process, and some deal with paperwork. As the buyer, you’ll usually handle most of these costs, but keep in mind, sellers often take care of real estate commissions and transfer fees.

How Much Should I Expect to Pay in Closing Costs?
  
Closing costs are usually 3–6% of the home's purchase price. For example, if you're buying a home in Utah with a median value of $600,000, you might expect to pay $18,000–$36,000 in closing costs. I can help you get an estimated breakdown of fees so you are better prepared before writing a home purchase contract. The best part is that when we find the home of your dreams, you will get a detailed list of these costs before closing, so there won’t be any surprise fees.

I wrote another blog that may be helpful when it comes to saving for your future purchase. It provides 5 Practicle Tips on How To Save For Your First Home. It's a quick read with great pin points on how to maximize your home purchase savings.

What Do Closing Costs Include?

These fees can vary based on your location and the size of the home, but here’s a general idea of what to expect:

• Application Fee: Some lenders charge a fee when you apply for your mortgage, but not all do. It’s usually non-refundable, so be sure to check!
• Credit Report Fee: This covers the cost of pulling your credit report, which helps lenders decide your interest rate.
• Loan Origination Fee: Your lender may charge a fee for processing your loan, typically 0.5% to 1% of the loan amount.
• Government Recording Costs: You’ll pay to register the property under your name, as required by local government agencies.
• Appraisal Fees: An appraiser checks the value of the home you're buying, and you’ll foot the bill for this service.
• Home Inspection Fee: Not required, but highly recommended! A home inspector checks for any issues with the house before you commit.
• Title Insurance: This protects you and your lender in case any past debts or claims on the property pop up.
• Survey Fees: If you’re planning on adding a pool or building onto your new home, a survey will show the property’s boundaries.
• Attorney Fees: In some states, an attorney oversees the closing process. The cost is usually shared between the buyer and the seller.
• Homeowners Insurance: Most lenders will want you to pay your first year of homeowner’s insurance upfront, so add this to the list!
• Escrow Payments: This is a deposit for property taxes and homeowner's insurance that gets held in an escrow account.

Tips for Managing Closing Costs

Every home purchase is unique, so your exact costs might look a little different. One way to manage your closing costs is to have your real estate agent negotiate on your behalf by asking the seller to contribute towards your closing costs. Another option, if you are obtaining a loan to purchase the home, you can discuss the fees your lender is charging you. Your lender will give you a breakdown of all fees involved that his/her company may charge. While looking it over ask if they have any special programs that minimize their fees.  

We have an awesome calcuator that estimates your monthly mortgage. If you are curious what a potential payment may look like calculate it HERE. 

The Bottom Line

Closing costs are an important part of the home buying process. While it may seem like a lot of fees to manage, we’re here to help guide you every step of the way. The exact costs depend on your loan, home value, and where you’re buying, but I can help make sure you’re prepared for what’s ahead. Schedule a consultation and I'd be happy to sit down with you to explain everything involved with your future home purchase. 

If you're ready to take the next step or have any questions about closing costs—or anything else about buying a home—give me a call! Let’s chat and see how we can make your home buying experience as smooth as possible.

Search homes in Northern Utah HERE.

Alisha Hidalgo 
Best Nest Utah with Real Broker LLC
(801) 703-7721
Alisha@BestNestUtah.com