Buyer Closing Costs Calculator

Property sales close with closing costs for the parties i.e. the buyer and the seller, however, buyer closing costs are comparatively lower than the seller closing costs. If you are a first-buyer then you might not know how much are the typical closing costs for buyers and how to calculate them!

This is where a “Closing Cost Calculator for the Buyer” can be extremely helpful in estimating how much you will be shelling out at the closure of the deal. However, understanding the home buying closing costs will smoothen the last few steps of your home-buying process and close the deal without any surprises.
Average closing costs for a buyer amounts to 2%-5% of the purchase amount. For illustrative purposes, on a purchase of a $300,000 home, you can expect to pay around $6,000-$15,000 as “buyer closing costs”.

First-time Home Buyer Closing Costs
If you are a first-time buyer then you are surely going to face some questions about where you have to pay and where you can save your hard-earned money, and our buyer closing costs calculator will help you tremendously in this endeavor. Some states, counties and cities offer assistance to first-time buyers with their low-interest loan programs or personal assistance as well. Get in touch with your local government to see what is available.

There is also another way of paying your buyer closing costs as a one-time payment and out of your own pocket because if you fold them into the loan – in case the lender allows – you will have to pay interest even on those costs throughout the mortgage payments.

Some Common Buyer Closing Costs
→ Appraisal fee ($300-$400)
→ Home inspection ($300-$500)
→ Application fee (varies)
→ Assumption fee (varies)
→ Attorney’s fee (hourly)
→ Prepaid interest (based on loan amount)
→ Origination fee (about 0.5% of the loan amount)
→ Discount points (1 point costs 1% of the loan amount)
→ Mortgage broker fee (0.50% to 2.75%)
→ Mortgage insurance application fee (varies)
→ Upfront mortgage insurance (0.55% to 2.25%)
→ FHA, VA and USDA fees (1% to 3.3%)
→ Property taxes (two months’ worth)
→ Upfront HOA fee (varies)
→ Homeowners insurance (depends on home value and location)
→ Title search fee (about $200)
→ Lender’s title insurance (varies)
→ Owner’s title insurance (0.5% to 1% of purchase price)

Buyer Closing Costs in Details
Loan Costs
A. Origination Charges
These charges are commonplace in the world of mortgages, however, not all lenders impose these charges on all the buyers. In some instances, the lender might even let go of these charges just to appease you, especially if you have a reliable credit score. If charged, then these charges will be specifically disclosed in advance.
To secure your loan, you need to pay your lender these two categories of origination charges:

      Origination Charges: This is the standard fee that you pay to your lender for the services of getting you a loan. Generally, this fee is directed to the loan officer or the broker who got you the loan. In other words, it is the originator’s commission on the deal. If you have a low credit score, chances are that you’ll have to pay higher origination charges. This will include the underwriting fee and application fee.

      Points: Generally, 1 point equals 1% of your loan. Points are not exactly a charge but an allowance that the lender gives you to pay more interest upfront so that you pay less in interest over the duration of your loan.

B. Services You Cannot Shop For
Just like any business transaction, selling or buying a home comes with a lot of legal and administrative paperwork. The lender needs to know that the loan they are providing is backed by a valuable asset and the government needs to make a record of these deals to collect the applicable fees and taxes.
Needless to say, all of this invites a significant amount of administrative and legal paperwork, and with the paperwork comes the charges.

         Appraisal fees: Before the lender finalizes your loan, they hire a trustable person to estimate the value of the property, and compare it with the loan being sanctioned. You will have to pay $300-$500 to the appraiser for their services. They will look at the size of the property, the features, the condition the house is in and the recent prices at which properties were sold in the concerned locality.

       Credit report fee: Your bank will have to purchase your credit report from one of the credit report agencies, and this fee is what your bank will charge for that purchase. Sometimes they waive it off, sometimes they don’t, but it should not be more than $30.

        Flood certification: If the property is located close to a flood plain, your bank will be asking for certification to confirm its status. You will have to pay $15-$20 to the Federal Emergency Management Agency (FEMA) to acquire this certificate.

         Other services: This will also include other kinds of service fees like tax monitoring fees and tax status research fees too.

C. Services You Can Shop For
As a buyer, you’d want to spend as little as possible on closing costs while buying your dream home. To do that, you might have to shop around to find a better deal.

             Title services and lender’s title insurance: In the home selling or home buying process, the title document is the most important document. This document denotes the actual owner of the house, and if it is found to be defective or counterfeit then it can derail the whole process. Title service companies research the title to make sure that it is valid. The lender will also ask for an insurance policy to cover the lender in case the title is later found to be invalid or fraudulent. Both of these charges vary significantly from state to state.

               Home inspection fees: You must be wondering if you are already paying an appraiser for appraising the property then why you should spend another $100-$500 for an inspector to inspect the same property? Well, both the authorities are different and perform two different functions.
Unlike an appraiser, the inspector looks at the interior of the house and determines any issues which might compromise the home’s safety until repaired. They ignore comparable properties and the price of the property and inspect the house from a safety point of view.

             Postage or courier fees: As discussed, a real estate transaction comes with a lot of paperwork and with it comes the need to transport the papers between the lender and the borrower. Your lender may delegate this responsibility to a courier company. This would additionally cost you up to $60.

             Survey: A survey is done, at the time of approving your loan, to determine the boundaries of your property, this evaluation includes the location of fences, gas lines, walls and so on. It is not mandatory in all states and generally costs between $100 and $400.

             Attorney: Your lender may hire an attorney to have a look at the paperwork and ensure that it passes all the legal guidelines. The home buyer is the one who bears this fee and it usually costs between $500-$700.

             Miscellaneous services: There might be some other miscellaneous fees too. These will be included by the lender in the final list of service fees.

D. Total Loan Costs
Origination Fees (A) + Services You Cannot Shop For (B) + Services You Can Shop For (C) = Total Loan Costs (D)

Non-Loan Costs
E. Taxes and Other Government Fees
Whenever a home is sold, the local government (generally, the county) records the sale and they charge recording fees for that. This fee is variable according to the state or county but mostly it is not more than $200.
Transfer taxes, also called transfer charges, are the charges that some local and state governments impose on a home sale deal. These charges vary by location, in some places you don’t need to spend on this at all.

F. Prepaid Fees
After you purchase the home, as a home buyer, there will be some costs that you will have to pay in advance for items you will be paying regularly as a homeowner. Houzeo’s closing costs calculator calculates these as well!

Some of these prepaid costs will be held into an escrow account and can be accessed only in certain conditions. This acts as a reserve fund just in case the deal fails or you – the buyer – are not able to pay this fee at some point in the future.

          Prepaid homeowner’s insurance: Homeowners insurance is highly beneficial as it safeguards your house (in some cases, your belongings too) from unforeseen events like theft, fire, bad weather, however, it does not cover earthquakes or flooding. Most of the lenders will make you buy an insurance policy for your home, which will usually be an upfront fee for several months to a year. The premiums of these insurances can range from several hundred dollars to several thousand dollars, depending on the state and the region.

          Upfront mortgage insurance premiums: According to the amount of your down payment, your lender may ask you to get mortgage insurance. You will have to pay an upfront prepaid fee that you will owe at the time of closing.

           Prepaid daily interest: In some cases, if you are closing a deal in the middle of the month, then you will have to pay interest for the remaining days of the month until your first full month in the home begins.

G. Initial Escrow Payment at Closing
           Escrow homeowner’s insurance: Just as we discussed above, this is one of the prepaid closing costs that you will have to incur as a buyer. You will have to pre-pay your insurance and hold it in an escrow amount, for instance of failure to pay in the future. This payment assures that the home will be covered for at least some months if the buyer runs into financial trouble.

           Escrow property taxes: Along with the above-mentioned fee, this is one of the most common fees IF your down payment amount is less than 20% of your loan amount. In some cases, the government can impose a lien on a house that has overdue property taxes, they might even foreclose on that house; in such cases, the government can claim the house before the lender, as tax liens are prioritized over mortgage liens. An escrow account for taxes gives the lender a backup if you do miss some tax payments and makes a property tax lien less likely to occur.  

H. Other Closing Costs for the Buyer
           Owner’s title insurance: Just like the lender has insurance that protects them from any title fraud or title invalidity, you as an owner should also be protected in such a scenario. This is an optional insurance policy and protects the owner from any financial loss that may arise due to a discrepancy in title validity. The rates of these policies differ from state to state but can be up to 0.5% of the loan balance.

          Additional other fees: Apart from the owner’s title insurance fee, other closing costs for buyers might also include HOA capital contribution, HOA processing fee, home inspection fee, home warranty fee, and real estate agent commissions.

I. Total Non-Loan Costs
Taxes and other government fees (E) + Prepaid fees (F) + Initial escrow payment at closing (G) + Other closing costs for buyers (H) = Total non-loan costs (I)

J. Total Closing Costs
Total loan costs (D) + Total non-loan costs (I) = Total closing costs (J)
This is the final amount of closing costs that you will have to pay as a buyer. It is calculated by adding your loan closing costs and non-loan closing costs. This is the amount that you should expect to pay over the home’s purchase price, so while drawing your budget, consider these closing costs too.

We have compiled all the common closing costs that every buyer has to incur at the time of purchasing their home. In general, you will have to pay 1%-5% of the price that you are paying for the home. You can finance these closing costs by folding them in your loan, but that would mean higher interest rates. Alternatively, you can sort out these closing costs in cash, just like your down payment.