Closing Costs Explained

In addition to the down payment, you’ll also have to pay closing costs — miscellaneous fees charged by those involved with the home sale (such as your lender for processing the loan, the title company for handling the paperwork, a land surveyor, local government offices for recording the deed, etc.).  The average closing costs percentage is usually about 2-5% of the purchase price (e.g., ~$4500 on a $180,000 home), but 1-8% is not uncommon.  And to be clear, nobody chooses a specific percentage number—the closing costs will just happen to add up to some percentage.


Your lender will give you an estimate of closing costs on the purchase of a particular house you’ve selected. This is called a “Good Faith Estimate” (“GFE”). If they don’t give it to you, ask for it.  Then, the day before the closing, ask your lender for the actual “Settlement Statement” (aka “the HUD” or “the HUD-1”), which is the final and complete form with all the numbers for the sale, including the actual closing costs.

Tip: Make sure to get the Good Faith Estimate (GFE) and Settlement Statement (HUD-1) from your Lender.  Review them and compare it to the typical closing costs above.  Direct any questions about it to your lender and your real estate agent.

Tip: Request that the seller pay the closing costs. If you don’t have enough cash to pay the closing costs, you can often get the closing costs paid for by the seller. If you wish to do this make sure your Realtor is aware that they must negotiate for your closing costs to be paid by the seller.