What it Costs to Close

Closing costs typically amount to 2-5 percent of the purchase price of the home, to be paid at the time the buyer closes on his or her mortgage. A recent survey reports that the average closing fee amounts to $3,700. While lenders are required by law to provide borrowers with good faith estimates of closing costs within three days of when they apply for a loan, many of the fees factored into this "estimate" can change by up to 10% and thus must not be interpreted as a firm calculation. Closing costs consider expenses such as attorney fees, a fee for running a buyer's credit report, an appraisal fee, a survey fee, title insurance and search fees, and an underwriting fee, among others. Estimate your closing costs and see how closing costs vary by state.

How to reduce closing costs: Although the buyer typically pays the closing fee, some homeowners negotiate this with the seller, who may agree to assume part or all of closing costs on behalf of the buyer. Borrows can also seek a no-closing cost mortgage. With this, a buyer pays no closing costs upfront but will likely be charged a higher interest rate, meaning the buyer is not saving that much money in the end.

At the end of the day, these fees may only be a fraction of the price you are paying for a home, but they still amount to thousands of dollars. Make sure that you plan for such expenses so that your home buying process goes as smoothly as possible!