When you buy a house that’s $200,000, you might assume that the only cash you need to bring to the table is the down payment. If that’s 20%, then you plan on handing over $40,000 that day.
But the actual amount is higher thanks to closing costs.
These often unexpected costs are part of every home-buying transaction, and navigating these extra expenses can be a complex and confusing process if you’ve never done it before.
There are fees and percentages to account for, which may not have been part of your initial calculation.
You can prepare yourself financially for them, however, and there are also ways to avoid these expenses. Here’s what you need to know.
If you’re over 50, take advantage of massive discounts and financial resources
Over 50? Join AARP today — because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.
How to become a member today:
- Go here, select your free gift, and click “Join Today”
- Create your account (important!) by answering a few simple questions
- Start enjoying your discounts and perks!
Important: Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up 25% off your AARP membership, making it just $12 per year with auto-renewal.
Closing costs may be between 2% and 5%
Closing costs are not included in the purchase price of your home, and they add up quickly. While 2–5% may not sound like a lot, it can feel significant when you’ve already been saving up carefully for your down payment.
Some mortgage lenders require title insurance
Title insurance isn’t required by law, but many mortgage lenders will need it to avoid troubles down the line. This will only run you a few hundred dollars, but you don’t want it to surprise you.
Real estate transfer fees come up when a property changes hands
You probably feel like you’re paying enough with your down payment, but there are also transfer fees involved in transferring a piece of real estate from one person to another. This fee varies by location, but expect to pay a percentage of the final purchase price.
Resolve $10,000 or more of your debt
Credit card debt is suffocating. It constantly weighs on your mind and controls every choice you make. You can end up emotionally and even physically drained from it. And even though you make regular payments, it feels like you can never make any progress because of the interest.
National Debt Relief could help you resolve your credit card debt with an affordable plan that works for you. Just tell them your situation, then find out your debt relief options.1
How to get National Debt Relief to help you resolve your debt: Sign up for a free debt assessment here. (Do not skip this step!) By signing up for a free assessment, National Debt Relief can assist you in settling your debt, but only if you schedule the assessment.
You’ll pay for the home appraisal and inspection
Did you know the buyer pays to have the home inspected to ensure it matches the condition promised in the listing? That will add another several hundred dollars to the fees you pay before closing.
There could be lender and broker fees
The lender and broker are, of course, going to want to be paid for their work. This could add up to 3% of the purchase price — on top of what you’re already paying.
Trending Stories
There may be a loan application fee
It may seem like just another way to add insult to injury, but it’s also possible that you’ll pay another fee just to apply for a mortgage. Typically, this will run a few hundred dollars.
You’ll pay a loan origination fee
You’re already paying a loan application fee, and then you’ll pay a loan origination fee. What’s the difference? The loan origination fee is the cost to make the loan — significantly more expensive than the application fee. It’s usually 1–2% of the purchase price.
You might have to hire a lawyer
Depending on your location or the complexity of the transaction, you may have to hire a lawyer to review all your contracts. This means paying an hourly legal fee, which can reach into the hundreds.
You’ll pay taxes at closing
First-time homeowner? Welcome to paying property taxes. You’ll be greeted into that world with two months of property taxes due at closing.
Earn cash back on everyday purchases with this rare account
Want to earn cash back on your everyday purchases without using a credit card? With the Discover®️ Cashback Debit Checking account (member FDIC), you can earn 1% cash back on up to $3,000 in debit card purchases each month!2
With no credit check to apply and no monthly fees to worry about, you can earn nearly passive income on purchases you’re making anyway — up to an extra $360 a year!
This rare checking account has other great perks too, like access to your paycheck up to 2 days early with Early Pay, no minimum deposit or monthly balance requirements, over 60K fee-free ATMs, and the ability to add cash to your account at Walmart stores nationwide.
Don’t leave money on the table — it only takes minutes to apply and it won’t impact your credit score.
Homeowners insurance may be required at closing
Your mortgage broker will probably require you to get homeowners insurance, which you must have in place by closing. This will likely cost a few hundred dollars per month.
You can negotiate to have the seller pay
There are a few ways to help reduce closing costs, including negotiating to have the seller pay some or all of the costs. Often, this is done through seller credits or asking the seller to pay the broker fee.
Closing at the end of the month can save money
If you close at the end of the month, you’ll reduce the number of days you’re accruing interest, which means less money due at closing. Unfortunately, it also means fewer days until your first mortgage payment.
Different lenders will charge different fees and rates
Most real estate experts will advise you to shop around before committing to a lender. That’s because each lender will charge different fees or come to the table with a different negotiating ability. Pick the one that’s most advantageous for you.
You can wrap the closing costs into the loan
If you don’t want to come to the table with the cash for closing costs, consider wrapping them into the loan. However, be aware that you’ll pay interest on those closing costs, just as you will pay interest on your monthly payment towards the principal.
Bottom line
A major ruling in the real estate world in 2024 changed how commission structures are negotiated.
It’s not entirely clear how this will impact buyers and sellers, but buyers may have more flexibility in the amount they decide to pay their agent — but this will also have to be decided upfront.
That means fewer surprises along the way and potentially lower closing costs, which is important for homeowners looking to build wealth.
Lucrative, Flat-Rate Cash Rewards
FinanceBuzz writers and editors score cards based on a number of objective features as well as our expert editorial assessment. Our partners do not influence how we rate products.
Wells Fargo Active Cash® Card
Current Offer
$200 cash rewards bonus after spending $500 in purchases in the first 3 months
Annual Fee
$0
Rewards Rate
Earn unlimited 2% cash rewards on purchases
Benefits
- Low spend threshold for its welcome offer — $200 cash rewards bonus after spending $500 in purchases in the first 3 months
- Cell phone protection benefit (subject to a $25 deductible)
- Can redeem rewards at an ATM for literal cash
Drawbacks
- Foreign transaction fee of 3%
- No bonus categories
- Select “Apply Now” to take advantage of this specific offer and learn more about product features, terms and conditions.
- Earn a $200 cash rewards bonus after spending $500 in purchases in the first 3 months.
- Earn unlimited 2% cash rewards on purchases.
- 0% intro APR for 12 months from account opening on purchases and qualifying balance transfers. 19.74%, 24.74%, or 29.74% Variable APR thereafter; balance transfers made within 120 days qualify for the intro rate and fee of 3% then a BT fee of up to 5%, min: $5.
- $0 annual fee.
- No categories to track or remember and cash rewards don’t expire as long as your account remains open.
- Find tickets to top sports and entertainment events, book travel, make dinner reservations and more with your complimentary 24/7 Visa Signature® Concierge.
- Up to $600 of cell phone protection against damage or theft. Subject to a $25 deductible.
Subscribe Today
Want extra-cash moves to come right to you?
Stop browsing endlessly. Get proven ways to earn pocket money, help cover rent, and crush your debt — sent to your inbox daily.