Closing costs can be a painful surprise to new home buyers.
What are closing costs?
They’re a range of expenses and services when buying a home. The majority of closing costs will fall on the buyer, but the seller will be responsible for some as well.
In most cases, buyers can expect to pay between 2% and 5% of the purchase price on closing fees. So, if the home costs $200,000, expect to pay between $4,000 and $10,000 in closing costs.
Understanding how closing costs work and what they cover will help you budget accordingly to ensure a smooth transaction in the final stages of buying a home.
1. Appraisal Fee
Lenders need to know how much a property is worth before they can approve a loan. There are two main reasons for this.
- To make sure the amount you want to borrow is justified.
- The lender needs to be able to recoup the value of the home if the buyer defaults on the loan.