Purchase Tips · February 15, 2025
Understanding Closing Costs: What You Will Pay and How to Reduce Them
Closing costs run 2-5% of the purchase price on top of your down payment. Here is the complete breakdown and proven strategies to minimize what you owe at closing.
On a $300,000 home, expect to bring an additional $6,000-$15,000 to closing beyond your down payment.
What Is Included
Lender Fees: Origination (0-1% of loan), underwriting ($400-$1,000).
Third-Party Fees: Appraisal ($400-$700), title search ($200-$400), title insurance lender policy ($500-$1,000), title insurance owner policy ($500-$1,000), attorney fees where required ($500-$1,500).
Prepaid Items: 12 months homeowners insurance, prepaid mortgage interest through month-end, 2-3 months property taxes into escrow.
Strategies to Reduce Closing Costs
- Negotiate seller concessions: Sellers can contribute up to 3-6% of purchase price toward your costs
- Close at end of month: Less prepaid interest required
- Shop third-party services: You can compare title companies
- Consider lender credits: Accept a slightly higher rate in exchange for the lender covering costs — smart if you plan to move within a few years
Loan Estimate and Closing Disclosure
Within 3 business days of application you receive a Loan Estimate showing anticipated costs. Three days before closing you receive the Closing Disclosure with final numbers. Compare them — if fees changed significantly, ask why.
HMS provides transparent, detailed cost breakdowns before you commit. Call 309-222-8286.