Buying a home is about more than saving for a down payment. Once you’re under contract, there’s another number you’ll want to understand: closing costs.
Closing costs are the fees and prepaid expenses associated with finalizing your mortgage and transferring the home into your name. They are separate from your down payment and can vary based on your lender, loan type, purchase price, property, and the terms you negotiate with the seller.
So, How Much Are Closing Costs?
A good rule of thumb for buyers is to budget approximately 2%–5% of the purchase price for closing costs.
For example:
| Home Price l | Estimated Closing Costs* |
|---|---|
| $400,000 | $8,000–$20,000 |
| $500,000 | $10,000–$25,000 |
| $600,000 | $12,000–$30,000 |
| $750,000 | $15,000–$37,500 |
**These are planning estimates, not a quote. Your actual costs will depend on your specific transaction**
What Exactly Are You Paying For?
Your closing costs can include several different categories:
Lender Fees
Origination, underwriting, processing, appraisal, credit-related fees, and potentially discount points.
Title & Settlement Costs
Title work, title insurance, settlement/closing fees, and other services needed to transfer and protect ownership.
Taxes & Recording Fees
Government fees associated with recording the deed and mortgage, along with applicable taxes or other charges.
Prepaid Expenses & Escrow
You may need to prepay items such as homeowners insurance, mortgage interest, and property taxes. Your lender may also collect money upfront to establish your escrow account.
Closing costs aren't necessarily all coming out of your pocket.
Depending on the transaction, buyers may be able to negotiate seller concessions, receive lender credits, or qualify for assistance programs that help offset some of these expenses. Lender credits, for example, can reduce upfront costs, although they may come with a higher interest rate.
And remember: “closing costs” and “cash to close” aren't always the same thing. Your cash to close can include your down payment and closing costs, minus things such as your earnest money deposit, seller credits, or other adjustments.
Don't wait until the week of closing to find out how much money you'll need.
Before you start shopping, talk with your lender about your estimated cash to close and build closing costs into your home-buying budget. Once you're under contract, your Loan Estimate and later your Closing Disclosure will give you a much clearer picture of exactly where your money is going.
Buying a home in Colorado Springs? Knowing your numbers before you fall in love with a house can make the entire process much less stressful and help you shop with confidence.
Information provided for educational purposes only. Actual closing costs vary by transaction, lender, loan program, property, and contract terms.
Monica Shea, REALTOR®
Monica Shea Real Estate Team
Keller Williams Aspire
Check out this article next
