How to Avoid Surprises with Closing Costs

For many buyers, the excitement of purchasing a home can be tempered by one final hurdle: closing costs. These fees, which typically range from 2% to 5% of the purchase price, often catch first-time buyers off guard. But with the right preparation, you can avoid surprises and budget with confidence.

1. Understand What Closing Costs Include

Closing costs are made up of a variety of fees, such as:

• Loan origination fees

• Appraisal and inspection costs

• Title search and title insurance

• Escrow fees

• Property taxes and homeowner’s insurance (prepaid portions)Knowing these ahead of time helps you plan for the true cost of closing.

2. Review Your Loan Estimate Early

Within three business days of applying for a mortgage, your lender must provide a Loan Estimate. This document outlines the expected closing costs, giving you a chance to review and ask questions before moving forward.

3. Shop Around for Services

Some fees, like title insurance or inspections, can vary between providers. Buyers who compare costs may save hundreds of dollars. Don’t assume all fees are fixed—ask your lender which services you’re free to shop for.

4. Factor Costs Into Your Budget

Many buyers focus solely on their down payment, but it’s just as important to set aside funds for closing. Adding 2%–5% of the purchase price to your budget ensures you’re financially ready.

5. Ask About Seller Concessions

In some markets, sellers may agree to cover part of your closing costs to make a deal more attractive. This is especially common if the property has been on the market for a while or if you’re competing with other offers.

6. Review the Final Closing Disclosure

At least three days before closing, you’ll receive the Closing Disclosure, which provides the final, itemized list of costs. Review it carefully, compare it to your Loan Estimate, and ask your lender to explain any differences.

Takeaway: Closing costs don’t have to be a surprise. By understanding what’s included, budgeting early, and reviewing your disclosures, you can approach the closing table with confidence and avoid last-minute stress.