What Does it Cost to Close on a House: A Guide for Homebuyers

Table of Contents

Closing on a house is an exciting milestone in the homebuying journey. However, it’s essential to be aware of the various costs involved in the process. This guide will provide a comprehensive overview of the most common expenses related to buying a house. Understanding these costs will empower you to plan your finances effectively and confidently navigate the closing process.

Earnest Money Deposit

An earnest money deposit is a cash payment made by the buyer to demonstrate their serious intent to purchase the property. It is typically a percentage of the home’s purchase price, which can vary but is often around 1-3% of the total. The earnest money deposit serves as a form of assurance for the seller and is held in an escrow account until the closing process is complete.

The Down Payment

The down payment on a house refers to the initial upfront cost made by the buyer towards the property’s purchase price. It is a percentage of the total home price not covered by the mortgage loan. The amount required for a down payment can vary based on several factors, including the type of loan you’re obtaining. Conventional loans most often require a down payment of 10% to 20% of the home’s purchase price. 

For example, on a $300,000 home, a down payment of $30,000 to $60,000 would be required for a conventional loan. However, government-backed loans such as FHA loans may offer more flexible down payment options, with a minimum requirement of 3.5% of the purchase price. It’s essential to consult with your lender to determine the specific down payment requirements based on your loan type, creditworthiness, and financial situation.

Understanding Closing Costs

Closing costs refer to the collective expenses of transferring property ownership from the seller to the buyer. These costs typically include charges from various parties involved in the real estate transaction. It’s important to note that closing costs can vary based on factors like location, property value, and mortgage terms.

On average, your buyer closing costs can range between 2% and 5% of the property’s purchase price. For example, if you’re buying a $300,000 home, you can expect to pay between $6,000 and $15,000 in closing costs. However, obtaining a detailed estimate from your lender or real estate agent is crucial to understand the specific costs associated with your purchase.

The Breakdown of Common Closing Costs

Credit Report: Obtaining a credit report costs around $30 to $50 on average. Lenders require a credit report to assess the borrower’s creditworthiness and determine the loan terms.

Application Fee: Some lenders might charge an application fee ranging from $200 to $500 to cover the administrative costs associated with processing the mortgage application.

Underwriting Fees: Underwriting fees typically range from $400 to $900 and cover the lender’s evaluation of the borrower’s loan application and financial documents to determine the risk involved.

Real Estate Attorney: In some states, a real estate attorney is mandatory. In others, it’s optional but can provide legal guidance throughout the closing process, ensuring all documentation is in order and protecting the buyer’s interests. Costs for real estate attorneys vary, but you can expect to pay between $500 and $2,500 depending on the complexity of the transaction and local rates.

Appraisal: The cost of a property appraisal can range from $300 to $600. The lender requires an appraisal to determine the market value of the property.

Inspection: A home inspection typically costs between $300 and $500. The buyer bears this expense, which provides a comprehensive assessment of the property’s condition, identifying any potential issues or repairs needed.

Survey: The cost of a property survey varies depending on the size and complexity of the land. On average, a survey can range from $300 to $1,000 or more. It’s not always required, but a property survey ensures that the boundaries and dimensions of the land are accurately represented.

Title Search: When buying a house, a title search is conducted to verify the property’s ownership history and ensure there are no outstanding liens or claims on the property. Title search costs can range from $150 to $500.

Title Insurance: Title insurance on the house protects the buyer and lender from potential defects or disputes regarding the property’s title. The cost of title insurance is around 0.5% to 1% of the home’s purchase price, on average.

Property Taxes: Buyers may need to prepay a portion of the property taxes, depending on the closing date and local tax laws. The amount varies depending on the property’s assessed value and tax rates in the area.

Homeowner’s Insurance: The cost of homeowner’s insurance varies based on factors such as the property’s location, coverage amount, and the buyer’s insurance provider. Homeowner’s insurance can cost between $500 and $2,000 per year.

Potential Flood or Fire Insurance: Additional insurance coverage may be necessary to protect against specific risks like floods or fires, depending on the property’s location. The cost of flood or fire insurance will depend on the property’s location and associated risk level.

Homeowner Association (HOA) Fees: If the property is part of a homeowner’s association, the buyer may be responsible for paying a portion of the annual or monthly fees. HOA fees may vary significantly depending on the amenities and services provided by the association.

Other Common Closing Costs: Additional expenses may include courier fees, escrow fees, notary fees, and recording fees, which are associated with the legal and administrative aspects of closing the transaction. These costs can vary but typically range from $100 to $500.

Other Expenses of Buying a House

Aside from closing costs, it’s vital to consider other expenses associated with buying a house. These expenses include:

Utility Deposits: When moving into a new home, utility companies may require deposits to initiate services such as electricity, water, and gas. The amount of these deposits can vary depending on the location and utility providers.

Moving Supplies: Moving supplies such as boxes, tape, and bubble wrap can add up in cost. On average, budgeting around $100 to $200 for moving supplies is a reasonable estimate.

Moving Truck and Fuel: Renting a moving truck and covering fuel costs can range from a few hundred dollars for local moves to over $1,000 for long-distance relocations. The final price will depend on the distance, truck size, and duration of the rental.

Hiring a Moving Company: If you opt to hire a moving company, costs can vary based on the size of the home, distance, and additional services required. Local moves may start around $500, while long-distance moves can cost several thousand dollars.

It’s important to note that these additional expenses can vary greatly depending on individual circumstances and preferences.

The Importance of an Emergency Fund

When purchasing a home, it’s essential to have an emergency fund in place. Unexpected situations can arise, such as temporary unemployment, unexpected medical expenses, or major home repairs. Having a financial cushion helps ensure you can continue to meet your mortgage payments and cover unexpected costs without undue financial stress.

In general, financial experts recommend maintaining an emergency fund that will provide about three to six months’ worth of living expenses. This fund provides a safety net and helps protect you from financial hardships during uncertain times.


Closing on a house involves various costs and expenses that homebuyers should be aware of. From earnest money deposits to closing costs, down payments, and other related fees, understanding these financial aspects is critical to successful homeownership. It’s important to budget wisely, seek estimates from professionals, and consult with your real estate agent, lender, or financial advisor to determine the specific costs you may encounter. By being financially prepared and having an emergency fund, you can embark on your homeownership journey with confidence and peace of mind.

Share This: