Tips & Tools

How to Explain Closing Costs

September 13, 2019
Closing Costs

Ever had a first-time homebuyer confused over closing costs? Prepping clients for these important figures can help ensure smooth sailing on closing day—not to mention a rock-solid client-agent relationship with the potential for extra referral business! Below you’ll find some quick basics you can go over with your clients. Even experienced homebuyers may not know everything that’s lumped into the category of closing costs, and might appreciate the extra clarification from their trusted real estate agent.


What are closing costs?

Closing costs, also called settlement costs, encompass two types of expenses:

  • One-time charges associated with a home purchase.
    These include (but aren’t limited to) loan origination fees, discount points, appraisal fees, title search fees, title insurance premiums, survey fees, transfer taxes, recording fees and credit report charges.
  • Upfront collection of property taxes and homeowners insurance premiums.
    This may be one year of homeowners insurance premiums plus—if the buyer is setting up escrow—several additional months of premiums. The buyer should also expect to pay multiple months of property taxes, depending on county and lender requirements. Make sure they know they’ll need to pay these items at closing!


How much should a buyer expect to pay?

Estimated closing costs will be listed on the buyer’s Loan Estimate Disclosure and final costs will be included on the Closing Disclosure, but you can safely tell your clients to budget between 3% and 5% of their home’s price to cover closing costs.


Feel free to share our buyer-focused blog article, The Facts on Closing Costs, via email or on social media if you think it would help start the conversation with your clients!

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