How much does it cost to buy a home? While buyers are typically well aware of the price tag in terms of the down payment and the overall cost of the mortgage, they frequently forget to take closing costs into account. These costs, which range from lender's fees to property taxes, are easy to forget about since they aren't assessed until the day of closing. But even though they represent a small portion of the overall price of the home, it's important to know how much they'll be, how you're going to pay them, and whether you can reduce them at all. 

How Much Are Closing Costs?

Closing costs can vary based on location, lender, and the price of the home, but in general, most buyers pay around 3 to 6 percent of the cost of the home in closing costs. For the buyer, most of the closing costs stem from the mortgage, while the seller pays the real estate agents' commissions.

The buyer's closing costs may include:

• Escrow amounts
• Title insurance
• Lender fees
• Home inspection
• Transfer taxes
• Mortgage insurance premiums
• Attorney fees

How to Plan for Closing Costs

The above may not be a comprehensive list, but suffice it to say that as a buyer, you'll see a lot of line items in your closing costs. Many of these costs will be relatively small, but they can add up quickly. So how do you plan accordingly?

Traditionally, you would make sure you've set aside some money for the closing costs. Your lender will give you an estimate of closing costs when you pre-qualify for a loan, and three days before closing the lender also has to give you a final list of all your closing costs.

Another alternative is to find a way to reduce your closing costs, lessening your out-of-pocket burden, perhaps permanently.

How to Reduce Closing Costs

If you don't have enough money set aside to pay your closing costs, or if you'd prefer to put that cash into your down payment, you may be able to reduce your closing costs by using one of the following tricks.

• Ask the seller to pay your closing costs. You may be able to work it into your offer that the seller pays the closing costs. This may be especially effective if the seller has already refused to negotiate on the price of the house.
• Ask your lender if you can roll the closing costs into the loan. Some lenders will allow you to roll the closing costs into the loan. Remember, though, that this means you will be paying interest on those closing costs!
• Seek a grant or loan program that will cover closing costs. There are grants, junior loans, and other programs available to help home buyers with closing costs, particularly first-time home buyers or home buyers who haven't owned a home for three or more years.
• Compare lender offers to find the most affordable closing costs. Since closing costs can vary by lender, it never hurts to get pre-qualified with several lenders and compare loan terms as well as closing costs.

A good real estate agent is your key to navigating the entire process of buying a home, not only shopping for a home but also shopping for lenders and comparing closing costs. Even when you feel overwhelmed by what you're about to undertake, knowing you have one of our REALTORS® at your side will give you peace of mind. Contact us to meet with one of our experienced real estate agents, or to browse Brighton homes for sale.