In addition to your down payment, there are other costs that you will incur as you purchase a home. Your closing costs, for example, are expenses you should be prepared for before you buy a house.

Closing costs are paid during your real estate closing, the final step in the home buying process that grants you official ownership of a property.

While the buyer typically pays for most of the closing costs, there are instances when the seller also has to pay some fees at closing. If you are refinancing your mortgage, you will also incur closing costs. In this case, you are responsible for paying all closing costs.

What Are Closing Costs?

Throughout your homebuying journey, third parties—i.e., your lender, real estate agent, and real estate attorney—have performed services to help you along the way. Your closing costs cover the fees these professionals charge for their services.

Closing costs also encompass other expenses, including title insurance, home title searches, home appraisals, and more.

How Much Are Closing Costs?

Closing costs can vary depending upon these three key factors:

  1. The price of the property
  2. The property’s location
  3. Whether you are purchasing or refinancing

However, as a general rule, homebuyers can expect to pay between 2% and 5% of their home’s purchase price in closing costs. Closing costs can also vary depending on your state, loan type, and mortgage lender.

By law, your lender is required to show you these costs in a loan estimate form within three days of your home loan application. Your loan estimate will contain an itemized list of all of your closing costs and fees.

Be sure to look through your loan estimate closely and ask your lender to clarify if you’re unsure what any fee entails.


When it comes to buying a home, closing costs are unavoidable. However, knowing what to expect will leave you better prepared. So, as you save up for your down payment, it is wise to set some money aside to cover your closing costs as well.

Ready to start your home buying journey? Coastal Custom Mortgage provides the most competitive rates and customized mortgage programs to help homebuyers reach their financial goals. Contact us today to get started!