Have you ever had a first-time homebuyer confused about closing costs? Helping clients understand these important figures is a key component of ensuring smooth sailing on closing day—not to mention maintaining a high-quality client-agent relationship with the potential for extra referral business! Below you’ll find some quick basics you can go over with your clients. Even experienced homebuyers may not know everything that’s lumped into the category of “closing costs,” and they might appreciate the extra clarification from their trusted real estate agent.
What are closing costs?
Closing costs, also called settlement costs, encompass two types of expenses:
One-time charges associated with a home purchase.
These include (but aren’t limited to) loan origination fees, discount points, appraisal fees, title search fees, title insurance premiums, survey fees, transfer taxes, recording fees and credit report charges.
Upfront collection of property taxes and homeowners’ insurance premiums.
This may encompass a single year of homeowners insurance premiums in addition to—if the buyer is setting up escrow—a few additional months of premiums. The buyer should also expect to pay multiple months’ worth of property taxes, depending on their regional and lender requirements. Make sure they know they’ll need to pay these items at closing!
How much should a buyer expect to pay?
Estimated closing costs will be listed on the buyer’s Loan Estimate Disclosure and final costs will be included on the Closing Disclosure. Total final costs can range between 3% and 8% of their home’s sale price depending on the location.
