Closing costs are the last bridge you need to cross to seal the deal on your housing transaction, whether you are selling a house or buying one.
This expense consists of multiple components that vary for the seller and buyer. It is essential to cater to these before and at the time of the closure of the deal.
Key Takeaways
- Closing costs, also known as “settlement costs,” are the final expenses to complete the real estate transaction.
- Closing costs are separate from the price of the property.
- Both the seller and the buyer have to pay closing costs.
- Some closing costs are negotiable.
- Some closing costs are tax deductible.
💰 CALCULATE YOUR CLOSING COSTS
What are Closing Costs?
Closing costs are a set of expenses that the seller and the buyer must pay to finalize the real estate transaction and transfer the ownership of the house.
How Much are Closing Costs?
Closing costs for sellers and buyers may vary across the U.S. as per state laws. Seller closing costs can range from 8% to 10% of the sales price. On the other hand, buyer closing costs can be anywhere between 2%-3% of the purchase price. Usually, the seller’s closing costs are deducted from the proceeds of the sale of the home paid by the buyer at closing.
» Closing Costs Calculator: Use this free tool by Houzeo to get an estimate on your closing costs!
Who Pays Closing Costs?
Both the seller and the buyer pay closing costs. Usually, the buyer pays most of the settlement costs. Nonetheless, they can negotiate these costs with the seller and the lender.
Some sellers may offer to pay the closing costs to sell their home faster or persuade homebuyers to remove certain terms and contingencies from the contract.
Typical Closing Costs
Seller Closing Costs
The estimated closing costs for sellers could reach up to 8% to 10% of the final sale price of the home, not including the mortgage payoff. The biggest closing cost (5%-6%) the seller has to pay is the listing and buyer’s agent commission. The remaining 3%-4% includes expenses like home inspection fee, HOA fee, estoppel fee, etc.
Let’s take a deeper look at these!
1. Attorney’s Fee
Sellers usually hire real estate attorneys to review the sales contract. This is particularly true in cases where no real estate brokers are involved, or if there are any legal issues with the property.
In most cases, the seller and buyer hire different attorneys to represent their best interests. If the seller and buyer hire the same attorney, the fee will be split.
2. Credits Towards Closing Costs
Sellers may offer to help buyers with closing costs to make their property more attractive, especially if they live in an area with low market competition. These are called closing credits or seller concessions. These are paid at closing.
3. Documentary Stamp
The documentary stamp refers to the excise tax levied on the documentation that transfers the property from the seller to the buyer. It is like paying tax on a property deed or some other official documentation.
4. Escrow Fee
An escrow is a neutral third party that holds certain funds or the property until the contract conditions have been met. It protects the interest of both parties by ensuring that either does not wrongfully back out of the deal and lose money. Typically, the escrow fee will be split between the seller and the buyer as both parties benefit from it.
» Escrow Meaning: Learn more about what is an escrow and why it’s important
5. Home Inspection Fee
The seller can opt for a home inspection to identify any major defects and issues they may have to resolve before selling it. These can be plumbing issues, water damage, mold, appliance malfunction, etc. A home inspection can be done before the property is listed on the market (pre-inspection) or just before the closing.
In some states, disclosing any current defects in the property is mandatory. In addition to this, some states also ask for information about any major damages that have been repaired.
The buyer can also undertake a home inspection. However, if they find undisclosed defects, it might give them the upper hand during negotiations. They may back out of the deal.
» Home Inspectors: Check out our rankings of the best home inspectors in the country
6. Home Warranty Fee
A home warranty covers the maintenance cost of the devices and appliances in the house for a limited time period, like, days, months, or years. The seller may offer a home warranty to make the property more desirable for buyers.
7. Homeowner Association (HOA) Fee/ Document Fee
If the seller is part of the Homeowners Association (HOA), they pay the organization an annual or monthly fee for their services. The HOA fee is used to maintain and improve common and communal areas, like swimming pools and clubhouses, which fall under its purview. At the time of closing, the seller will have to pay the fee due until the closing date and clear the remaining dues, if any.
8. HOA Estoppel Fee
The HOA Estoppel letter is a legally binding document containing details about the financial obligation that the buyer will have to fulfill after closing. It offers information about the monthly or annual HOA fee the buyer will have to pay and any unresolved dues owed by the seller.
The HOA Estoppel fee needs to be paid by the seller as part of the process.
9. Homeowners Association Transfer Fee
The Homeowner Association Transfer Fee is the cost of transferring ownership of a house from the seller to the buyer in the HOA records. It is a one-time non-negotiable fee.
10. Mortgage Payoff
Mortgage payoff will most likely be one of the biggest items on the seller’s list of fees. The seller must pay off any remaining balance of the mortgage on their property with the proceeds of the home sale at closing. This includes interest accrued from the last payment to the day of closing, and any penalty that the lender may charge for prepayment of the mortgage.
11. Municipal Lien Search
A Municipal Lien Search helps uncover any unrecorded liens, code violations, permits, taxes, and utility bills, associated with the property. Many sellers choose to forego a municipal lien search as they undertake a title search. However, since a municipal lien search offers additional information about open or expired permits, it can help cover all bases.
An open or expired permit can be a thorn in the side for both the seller and buyer as it can lead to further expenses and delays in the sale.
12. Owner’s Title Insurance
The title insurance cost is based on the property value and is decided by the state. The seller primarily pays for the owner’s title insurance. It protects the buyer against discrepancies relating to the ownership of the property or false documentation. Additionally, title insurance takes care of any back taxes, liens, ownership clauses, etc.
Both parties can negotiate who purchases the owner’s title insurance.
13. Property Taxes
The owner of the house has to pay property tax amounting to 1.1% of the home value to the local government. It can be paid annually or at the time of the real estate transaction. The seller must pay prorated property tax according to the date of purchase at closing.
14. Real Estate Agent Commission
A significant amount of the seller paying closing costs go towards Realtor commissions, 5%-6% of the sales price. This is why the closing costs for the seller draw a higher percentage than closing costs for buyers.
An important thing to note is that the seller pays commission to the listing agent as well as the buyer’s agent. Listing agent commission is crucial for wide exposure of the property in the home selling market. Likewise, the buyer agent commission is required to attract potential represented buyers.
15. Settlement Fee/Escrow Fee
Settlement fee is the compensation paid to a settlement agent for their closing services. A settlement agent is a third-party intermediary who helps the seller and buyer complete the transaction by clearing the house for sale and transferring ownership to the buyer and the respective funds to the seller.
Depending on the state laws, the settlement agent could be a title company, an escrow company, or an attorney. In 21 U.S. states and the District of Columbia, it is mandatory for an attorney to be a part of the deal closure.
16. Utility Bills
The seller must pay all utility bills till the date of purchase of the house. The title company usually checks for unpaid bills and utility liens. If there are any dues, the seller must clear them at closing.
Closing Costs for Sellers Near You
Buyer Closing Costs
1. Application Fee
Some mortgage lenders charge buyers an upfront non-refundable fee when they submit their loan application. The application fee varies for different lenders. Some lenders may treat the application fee as a deposit towards closing costs, while others may charge it as a separate fee.
Please note that only some lenders charge a loan application fee.
2. Appraisal Fee
Home appraisal is the process by which an appraiser determines the fair market value of a house based on various factors. Some of these factors are the location of the house, its condition, size, and structural age.
An appraiser is a licensed professional. The appraisal report determines the loan amount the lender may grant the buyer.
Buyer real estate agents often include an appraisal contingency clause in the sales contract, especially if the buyer needs a mortgage. This allows the buyers to walk away with their deposit if the appraised home value does not match the agreed-upon price.
3. Attorney Fees
A real estate attorney is licensed to practice real estate law. They draft and review the purchase agreement and transfer of title on behalf of the lender. They also offer advice on negotiations. Buyers usually hire attorneys when there is a complex or unusual transaction involved.
Some situations that may warrant hiring an attorney are joint ownership of the house, private loans from family or friends, the presence of easements on the property, or difficulty in understanding the contract.
4. Closing Fee
Closing fee is paid to the settlement agent. The settlement agent involved in closing depends on the law in the state where the property is located. As mentioned above, in some states an attorney is required to be a part of the closing by law. Usually, this cost is split between the buyer and the seller.
5. Courier Fee
The courier fee covers the cost of sending the documents to various parties. It is paid for by the buyer.
6. Credit Reporting Fee
A credit report is a statement of an individual’s credit accounts, i.e., how they pay their bills and loans, information about their debts, and more. Credit reporting fee is the cost of obtaining a credit report. The lender uses the buyer’s credit report to estimate their ability to pay back the mortgage and the risk involved in approving the loan.
7. Discount Points/Mortgage Points
Discount points are a way for the buyer to lower their interest rate by paying some money upfront. This is called “buying down the interest rate.” A lower interest rate means a reduced monthly payment.
Buyers can purchase one discount point for a fee of 1% of the mortgage amount. Typically, lenders slash the interest rate by 0.25% for every discount point. However, there is not a fixed amount. The lender may decide on the effect of the discount points based on the type of loan and prevailing mortgage rates.
8. Flood Certification Fee
The lender requires a flood certification if the property the buyer intends to purchase is in or around a flood zone, according to maps by FEMA (Federal Emergency Management Agency). The lender uses this report to determine if special flood insurance is required.
9. Homeowner’s Insurance
Most lenders require the buyer to purchase homeowner insurance with full coverage before they finance the loan. Homeowner’s insurance premiums are usually a part of the mortgage escrow accounts.
10. Lead-based Paint Inspection
The U.S. Government banned the use of lead-based paint in 1978 owing to hazardous exposure of lead to children. The buyer must get a lead-based paint inspection if they are purchasing a house built before 1978.
The cost of the inspection varies according to the size and location of the property. Water and soil testing warrant extra charges.
11. Lender’s Title Insurance
Apart from homeowners insurance, many lenders also require the buyer to purchase a lender’s title insurance. It protects the lender against loss over potential legal claims over the house or if the seller cannot rightfully transfer the ownership of the house.
12. Loan Origination Fee
A loan origination fee is an upfront fee charged by the mortgage lender to execute the loan. It is usually set before the loan is processed. Buyers can negotiate this fee with the lender. However, in some cases, it may lead to a higher interest rate on the loan.
» Also Read: Know the Details of Mortgage Origination Fees
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13. Mortgage Escrow Account/ Impound Account
The mortgage lender reserves a part of the buyer’s monthly mortgage payments in an escrow or impound account. This money is used to pay the property tax and homeowners insurance premiums. The mortgage escrow account is managed by a mortgage servicer who makes the payments on the buyer’s behalf.
14. Private Mortgage Insurance
The lender takes a certain amount of risk when they issue a loan. Private mortgage insurance (PMI) is a policy that lowers this risk by protecting them against default on home loans.
The mortgage insurance a buyer must pay depends on the type of loan they take.
Conventional Loan
A conventional loan is a type of loan that is not insured by the government or any federal agency. The minimum credit score required for a conventional loan is 620, and the average down payment on a house for a conventional loan is 3%. However, buyers with a low credit score and higher debt-to-income ratio may be required to pay an elevated minimum down payment.
Lenders require buyers to pay PMI for conventional loans when they make a down payment of less than 20%. The average rate of PMI for conventional loans ranges from 0.5% – 1.86% of the original loan amount. Buyers can choose to pay the full PMI or a part of it upfront to lower their monthly mortgage payments.
FHA Loan
FHA loans are designed to help moderate-income buyers with lower credit scores become homeowners. It is insured by the Federal Housing Administration (FHA). It allows for a lower minimum down payment and has less-restrictive credit score requirements than conventional loans.
An FHA loan warrants a down payment of 3.5% for buyers with a credit score of 580. Buyers with a credit score of 500-579 can also secure an FHA loan. However, they have to make a down payment of 10%
All FHA loans require mortgage insurance. The buyer is required to pay an upfront premium and additional annual payment. The amount of these payments is decided according to the size of the loan.
VA Loan
VA loans are exclusively for active-duty members, veterans, and, in some cases, surviving family members. It is guaranteed by the U.S. Department of Veterans Affairs (VA). These types of loans do not have a minimum credit score requirement. Hence, most mortgage lenders set their own minimum requirements.
Buyers opting for VA loans do not require mortgage insurance. However, they have to pay a VA funding fee.
» VA Jumbo Loan: Read to Know more.
15. Pest Inspection Fee
A pest inspection is usually done if the home inspector or appraiser observes structural damage due to pest infestation. Some lenders require an official report of the inspection.
In more than 31 U.S. states, a pest inspection is required before a VA loan can be closed.
16. Prepaid Daily Interest Charges
The monthly mortgage payment is due on the 1st of every month, starting 30 days after closing. However, the interest on the mortgage starts accumulating from the day of closing itself. The buyer must pay the accrued interest from the closing day to the first mortgage payment as closing expenses. These are called prepaid daily interest charges.
So, for instance, if a buyer purchases a house on the 4th June, their first mortgage payment will be due on the 1st August. They have to pay the accrued interest on the loan from 4th June to 31st July at the time of closing.
17. Property Tax
As mentioned earlier, property tax is levied by the local government on homeowners for services like public schools, police, garbage collection, etc. The amount of property tax is based on the market value of the house.
Lenders may require buyers to pay one year’s worth of property tax in advance at closing. These funds are usually paid via a mortgage escrow account.
18. Rate Lock Fee
A rate lock fee is the cost of fixing the mortgage interest rate at a specific price for a set period. This keeps the buyer safe from market fluctuations.
19. Recording Fee
A recording fee is paid to the local government to register the change in ownership of a house or sale of a property in the public record. It also records mortgages and other liens against the house. Recording fee is usually charged by the county.
20. Survey Fee
A survey fee is the compensation paid to a professional surveyor who creates a drawing of the property. The drawing highlights property boundaries, easements, improvements, and the physical features of the land, like home elevation, etc. It gives buyers a better idea of the property they are buying in a legal and official capacity.
The survey fee depends on factors like the dimensions of the property, its terrain, and accessibility.
21. Tax Monitoring/Tax Status Research Fee
A tax monitoring fee is paid to a tax service agency that monitors if the buyer is paying the property tax on time. The tax service agency alerts the lender in case the buyer defaults. It is also sometimes referred to as tax service fee.
Lenders opt for tax monitoring to prevent tax liens and protect their access to the property.
22. Title Search Fee
Title search is the process of examining public records like deeds, tax liens, land records, court judgments, etc., to determine a property’s legal ownership. The title search helps determine any liens or claims on the property that the seller may also be unaware of.
The fee for this procedure is called the title fee.
23. Transfer Tax
Transfer tax is levied to transfer ownership of the house from the seller to the owner. The tax amount is based on the value of the property. It may be imposed by the municipality, county, or state.
Depending on the negotiations, the transfer tax can be paid by either seller or buyer. In some cases, the tax is split between the parties.
24. Underwriting Fee
Underwriting fee is charged by mortgage underwriters to evaluate and verify loan applications. It is a non-recurring fee. Some lenders charge it in place of the originating fee, while others charge it in addition to the same.
25. VA Funding Fee
The VA funding fee is a one-time fee paid to the Department of Veteran Affairs (VA) that runs the VA loan program. The VA fee a buyer has to pay depends on the down payment they make for a property. Buyers who make a down payment of less than 5% have to pay a VA fee of 2.3% for their first home and 3.6% on any subsequent homes.
| Down Payment | VA Fee for 1st Loan | VA Fee for Subsequent Loans |
|---|---|---|
| Less than 5% | 2.3% | 3.6% |
| 5% or more | 1.65% | 1.65% |
| 10% or more | 1.4% | 1.4% |
Closing Costs for Buyers Near You
| Region | Closing Costs for Buyers |
|---|---|
| Northeast | Connecticut | Massachusetts | New Hampshire | New Jersey | New York | Pennsylvania | Rhode Island | Vermont | Delaware | Maine |
| Midwest | Illinois | Indiana | Iowa | Kansas | Michigan | Minnesota | Missouri | Nebraska | North Dakota | Ohio | South Dakota | Wisconsin |
| South | Alabama | Arkansas | Florida | Georgia | Kentucky | Louisiana | Maryland | Mississippi | North Carolina | Oklahoma | South Carolina | Tennessee | Virginia | Texas | Washington D.C. | West Virginia |
| West | Alaska | Arizona | California | Colorado | Hawaii | Idaho | Montana | Nevada | New Mexico | Oregon | Utah | Washington | Wyoming |
Average Closing Costs
| Closing Cost | For Sellers | For Buyers |
|---|---|---|
| Application Fee | - | $300-$500 |
| Appraisal Fee | - | $300-$450 |
| Attorney's Fee | $150-$400 per hour | $150-$400 per hour |
| Courier Fee | - | Varies according to location |
| Credit Reporting Fee | - | $30 |
| Credits Towards Closing Costs | Varies according to negotiation | - |
| Discount Points/Mortgage Points | - | 1% for 1 discount point |
| Documentary Stamp | $1.50 per $1000 of sales price | - |
| Escrow Fee | 1%-2% of sales price | |
| FHA Mortgage Insurance | - | Varies according to loan amount |
| Flood Certification Fee | - | $15-$25 |
| Home Inspection Fee | $300-$500 | - |
| Homeowner's Insurance | - | $149 per month |
| Home Warranty Fee | $300-$600 | - |
| HOA Fee/ Document Fee | $200-$300 | - |
| HOA Estoppel Fee | $100-$250 | - |
| HOA Transfer Fee | $200-$250 | - |
| Lead-based Paint Inspection | - | $233-$422 |
| Lender's Title Insurance | - | 0.1% of sales price |
| Loan Origination Fee | - | 0.5%-1% of loan amount |
| Mortgage Escrow Account/Impound Account | - | 1%-2% of sales price |
| Municipal Lien Search | $140-$200 | - |
| Owner's Title Insurance | 0.4% of sales price | |
| Pest Inspection Fee | - | $100-$200 |
| Prepaid Daily Interest Charges | - | Varies according to mortgage amount |
| Private Mortgage Insurance | - | 0.58%-1.86% of loan amount |
| Property Tax | 1.1% of sales price | 1.1% of sales price |
| Rate Lock Fee | - | 0.25%-0.5% for 60 days or less + 0.06%-0.37% for extension |
| Real Estate Agent Commission | 6% of sales price | - |
| Recording Fee | - | $125 |
| Settlement Fee | $150-$500 | $150-$500 |
| Survey Fee | - | $500 |
| Tax Monitoring Fee | - | $50 |
| Title Search Fee | - | $75-$200 |
| Transfer Tax | - | 0.01%-4% of sales price |
| Underwriting Fee | - | $400-$900 |
| Utility Bills | Varies according to pending dues | - |
| VA Funding Fee | - | 0.5%-3.6% of loan amount |
Closing Costs Calculator
Closing costs vary heavily according to location and mortgage rates. Houzeo’s Closing Costs Calculator is a free tool that factors in these elements to help sellers and buyers estimate their closing costs. It shows the user a detailed list of itemized costs and highlights junk costs that can be avoided.
Houzeo’s Closing Cost Estimator is frequently calibrated to give sellers and buyers the closest estimate according to market conditions.
» Closing Cost Calculator: Check your closing costs now!
How Much are Closing Costs on a Refinance?
Sometimes buyers take a new mortgage to pay off the one they had taken when buying the house. This trade-off is called refinancing a mortgage. The cost of refinancing a house usually is 2%-6% of the loan amount.
A buyer may consider refinancing their mortgage for many reasons like removing or adding someone to the mortgage, changing their loan term, lowering interest rates, changing the type of loan, switching from an adjustable-rate mortgage to a fixed-rate loan, opting for cash-out refinance, etc.
Typical Closing Costs on a Refinance
The buyer has to pay certain closing costs when refinancing their mortgage. These include –
- Application Fees
- Appraisal Fees
- Attorney/Settlement Fees
- Credit Reporting Fees
- Inspection Fees
- Origination Fees
- Prepaid Daily Interest Charges
- Recording Fees
- Survey Fees
- Title Search Fees
- Underwriting Fees
Factors That Affect Refinance Closing Costs
1. Credit Score
If the buyer’s credit score has changed since the first mortgage, the lender may offer them different terms based on the new score.
2. Discount Points
Buyers can buy down the mortgage interest by purchasing discount points from the lenders.
3. Lender Fee
Closing costs include expenses such as an application fee and loan origination fee. Some lenders may waive or lower these fees.
4. Location
The cost of different closing expenses, like property taxes by state, insurance, recording fee, title fee, settlement fee, etc., varies across the U.S. This can have an impact on the closing costs.
In addition to this, the local competition amongst mortgage lenders can influence the interest rate, consequently affecting the monthly payments.
5. Size of Loan
The bigger the loan, the higher the monthly payments. However, smaller loans, $100,000 or less, often have higher interest rates to cover the fixed costs lenders incur.
6. Type of Refinance
A cash-out refinance, where the buyer borrows more money than they owe against their equity, poses a higher risk for the lenders. Hence, these usually have a higher rate of interest. Moreover, a cash-out refinance puts the buyer at the risk of having to pay PMI if the value of their house decreases.
7. Type of Loan
Some closing costs, like PMI, are determined by the type of loan a buyer opts for.
Are Closing Costs Negotiable?
Yes. Both the seller and buyer can negotiate a part of their specific closing costs. Usually, with the exception of the fee paid to federal organizations and third-party service providers, all expenses are negotiable.
1. Realtor Fee
Realtor commission is the biggest seller closing cost since they have to pay commission to the seller’s agent as well as the buyer’s agent. Most sellers shell out 6% of the sales price of their house as realtor commission. However, they can negotiate this fee with the realty.
» Best Realtors: Check out our rankings of the top Realtors in the US
2. Loan Application Fee
This is a one-time fee lenders charge to start a loan application. Buyers can negotiate for this fee to be lowered or waived off, especially if they have paid the lender for other fees.
3. Origination Fee
Many lenders charge 1% of the loan amount as an originating fee to process the loan. But buyers can negotiate for this fee to be lowered or waived off.
4. Underwriting Fee
Some lenders may charge this fee in place of the originating fee, while others charge it in addition to the latter. Buyers can negotiate this fee.
5. Discount Points
Buyers can discuss the cost of each discount point and its value in terms of interest rate with the lender, especially if they have received offers from multiple lenders. While this may increase the upfront closing costs, it will help lower the monthly mortgage payments.
6. Homeowner’s Insurance
Most lenders offer referrals for insurance vendors to buyers. However, buyers are free to explore insurance providers off the lender’s list to find the best deal.
7. Lender’s Title Insurance
Buyers can request the lender to opt for an economical title insurance vendor.
How to Reduce Closing Costs?
For Sellers
1. Opt for a discount broker or a flat fee realtor
Compared to traditional brokers who charge 6% of the sales price as commission, discount real estate brokers only charge 3%-4% of the sales price for their services. In fact, some low commission realtors offer higher concessions if sellers choose them as their buyer’s agents for their next real estate purchase.
2. Choose “For Sale By Owner” (FSBO)
Sellers can save up to 3% real estate agent commission and cut several costs by opting for “For Sale By Owner” services. Houzeo offers services like Flat Fee MLS for FSBO sellers that list properties on the MLS and make the selling process easier and smoother. What’s more, if the buyer is unrepresented, with Houzeo, sellers can sell their homes for zero realtor commission charge!
» For Sale By Owner Websites: Check out the best FSBO websites in 2022
3. Research and compare
Sellers can save on closing costs such as attorney fees, home inspection fees, and escrow fees by researching and comparing more affordable services to find the one most suitable for them.
4. Ask the buyer to cover seller closing costs
Buyers may agree to cover the seller’s closing costs if the market is competitive and fewer houses are in the market. On the other hand, sellers can raise the listing price to cover full or partial closing costs.
For Buyers
1. Opt for a rebate program
Some real estate brokers offer buyers incentives like rebates that help lower their closing costs and/or buy down the mortgage interest. Real estate agent services are free for buyers as sellers pay the agent commission for both parties.
2. Give a solid offer
Present an attractive deal to entice the other party to cover some of the closing costs. An irresistible offer, although it doesn’t mean more proceeds, can reduce expenses. The better the offer, the more they’ll want to accommodate the deal. Hence, there’s a great chance the seller will pay the added cost to keep the transaction easier and quicker.
3. Minimize requests
Making demands can make the deal slow and troublesome for both parties. Hence, buyers should make minimal requests so the seller will be more willing to cover some of the closing costs. If there are too many inconveniences, the seller may question the genuineness of the buyer and feel the need to back out.
4. Make it quick and hassle-free
Most of the sellers aren’t happy dealing with the lengthy transaction. As much as possible, buyers must keep the transaction straightforward without beating the bush.
5. Research and compare
Buyers can save closing costs by carefully comparing and choosing the best lender for their situation according to their fee and mortgage rate. Additionally, they can opt for economical insurance providers, pest inspection services, and lead-based paint inspection services.
6. Ask the seller to cover closing costs
Depending on the market conditions, the buyer can negotiate the deal with the seller by requesting them to cover some of the buyer’s closing costs or offer credits towards closing costs.
How to Get Closing Costs Waived?
The answer to the question “How to get closing costs waived?” is more or less the same as negotiating closing costs.
In addition to the above, one way buyers can try to get the closing cost waived is by opting for a no-closing costs mortgage. However, the interest rate for a no closing cost mortgage is usually high.
Are Closing Costs Tax Deductible?
Only closing costs that are or can be considered interest or taxes can be written off for deductions.
Some tax-deductible seller closing costs are property tax, utility installation charges, real estate commissions, legal fees, transfer taxes, title policy fees, and deed recording fees.
Some tax-deductible buyer closing costs are origination fee, discount points, mortgage insurance premiums, VA funding fee, title fee, survey fee, transfer tax, property tax, prepaid daily interest charges, and recording fee.
Conclusion
Developing an understanding of closing costs is important for both sellers and buyers as it can greatly impact their profits. Sellers should be aware of closing costs as it is an important factor in calculating the listing price of a house. Similarly, buyers should have knowledge of closing costs to estimate if they can afford to spend financially and where they can save on junk fees.
If you have not begun your real estate journey yet, opt for Houzeo. Houzeo.com, a tech company, provides an unbeatable combination of maximum savings, cutting-edge technology, and 5-star customer support. With its 100% virtual service, it helps home sellers list their property without any hassle from the comfort of their homes, while also allowing home buyers to explore properties and make offers online. Houzeo’s customer-centric approach, advanced technology, and flat fee packages make it an ideal choice for those looking to avoid paying high commissions and closing costs.
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» Need More Clarity? Read these exclusive Houzeo reviews and learn why the platform is the best in America’s competitive housing market.
Frequently Asked Questions
1. How much are closing costs on a house?
On average, sellers pay 8%-10% of the sales price of their house as closing costs. On the other hand, buyers spend 2%-6% of the purchase price as closing costs.
2. Can you claim closing costs on taxes?
Yes. Sellers and buyers can claim tax deductions on some closing costs that are considered as taxes or insurance.
3. Do you have to pay closing costs when you refinance?
Yes. When refinancing a mortgage, the buyer has to pay some closing costs like application fee, appraisal fee, attorney/settlement fee, credit reporting fee, prepaid daily interest charges, etc.
4. How is closing cost calculated?
Closing costs are a sum of specific settlement expenses. These vary according to the location, mortgage rates, and market conditions. Houzeo's closing cost estimator is a free tool that sellers and buyers can use to get a close estimate of their settlement costs.
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Also Read
- How to Sell My House Fast: Selling a house in America takes approximately 90 days from list to close. But that’s only if you get offers fast and there are no hiccups in home inspection, appraisal, and closing. Here’s how you can sell your house fast and for more cash.
- Cash Home Buyers: If you’re looking for an all-cash offer to make a quick sale, then companies that buy houses for cash are your best bet.
- How To Sell a House By Owner: If you’re planning to sell your house on your own, check out this guide to help you through the process.
- How To List on the MLS: List your home on the MLS yourself without hiring a real estate agent.
- For Sale By Owner Contract: Check out how to create a contract for an FSBO transaction.
- Selling a House: Selling a house in the United States is complex and requires a good understanding of the real estate market.
- Selling a House As Is: If you want to sell your house without incurring any repair charges, then check out this blog on the ‘as-is’ approach.
- Closing Costs for Sellers: What are the closing costs as a seller? See what’s the real cost and how you can negotiate your closing costs as a seller.
- Closing Costs for Buyers: What are the closing costs as a buyer? See what’s the real cost and how you can negotiate your closing costs as a buyer.
- Seller Disclosure: Check out the seller disclosure requirements in each state.
- Best Real Estate Websites: The majority of homebuyers and home sellers go through a real estate website before reaching out to a realtor. Read our list of the top 12 real estate websites in the USA.
- Top Real Estate Agents: Check out the top real estate agents in the country who can guide you in your real estate journey.
- Buyer Closing Costs in California: Know about the buyer closing costs in California.
- How Much is Title Insurance in California: Know how title insurance policy protects against property title-related issues.
- Basis Points: Read to know more.
