What are closing costs?
Closing costs are all the fees you’ll pay at your closing meeting, which is the last step in the home buying process. Once you close your loan, those long-awaited house keys will officially be yours.
Closing costs might seem like a confusing jumble of dollar signs at first. The good news is there are ways to save money on them. Prepare to dig in and do some research, but a little bit of extra work could save you thousands of dollars.
How much are closing costs, on average?
Buyers can expect to pay between 2 and 5% of a home’s purchase price in closing costs.1 On a $200,000 house, that amounts to $4,000-$10,000. Gulp. Yes, you read that right. You’ll pay closing costs on top of your 5-10% down payment. So on a $200,000 house, you could hand over a grand total of $14,000 to $30,000 (down payment and closing costs) before you get your house keys.
But don’t let the numbers scare you off. There are definitely ways to cut closing costs. Whatever your final savings total ends up being, you’ll need to keep this money easily accessible as you get ready for closing. Consider depositing closing funds in an online savings account or money market account. You can easily transfer the money to your checking account right before closing. You’ll then wire the funds or write a check to your escrow company.