If you are about to buy a home, you might think you have budgeted everything. But are you prepared for all the fees that come with closing? Nearly 91% of buyers said they encountered at least one unexpected cost during the closing process.
1. The Loan Origination Fee
For 66% of homebuyers, the loan origination fee was the most unexpected cost. This fee covers the lender's administrative costs for processing your loan and can range from 0.5% to 1% of the loan amount. Ask your lender upfront and negotiate if possible.
2. Appraisal Costs
Appraisals are a necessary part of the home-buying process, typically costing between $300 and $600. Some lenders require a second appraisal for high-value properties.
3. Title Insurance
Title insurance protects both the buyer and lender against any title issues. It can often be negotiated or shopped around — most buyers do not realize this is not a fixed cost.
4. Prepaid Property Taxes and Homeowners Insurance
At closing, you will typically need to prepay several months of property taxes and homeowners insurance into escrow. In Sonoma County, this can add several thousand dollars to your closing costs.
5. HOA Transfer Fees
If your new home is part of a homeowners association, there may be transfer fees associated with changing ownership. These vary widely and are easy to overlook until you see them on the settlement statement.
"Buying a home is one of the most significant financial commitments you'll ever make, and no one likes surprises."
How to Avoid Sticker Shock at Closing
- Ask your lender and agent about potential fees before you are under contract
- Get multiple quotes on title insurance and closing services
- Budget for 10-15% more than your estimated closing costs as a buffer
Don't want surprises on closing day?
I walk every buyer through what to expect before we get to the table. Let's make sure you go into closing day confident and fully prepared.