When buying a home, home buyers incur several other costs besides the principal payment for the property. These expenses occur due to the additional services and processes that made the deal possible. These amounts of money go toward paying for title documents, appraisals during escrows, courier fees, attorney fees, homeowners’ insurance, among others. These costs may sum up to a considerable budget, and it is why most buyers in Southwest Florida negotiate with home sellers to cater for other closing costs.

Understanding Home-Purchase Closing Costs

closing costshttps://heightstitle.com/wp-content/uploads/2019/07/closing-costs-when-buying-a-home.jpgWhen closing on a deal, several charges are imposed on both the buyer and the seller to cater to the services involved in the process. These services include financing, approvals, and property insurance processing. These costs barely appear in the down payment charges. Actually, it’s an aspect which catches most home buyers by surprise.

Altogether, closing costs may account to 3%-5% of the total home purchase expenses, which may mean additional thousands of dollars. Homebuyers, however, have an option of including closing costs to their mortgage which will be paid in instalments.

Buyers’ Closing Costs

Buyer’s closing expenses fall under two categories:

  1. The costs involved in home acquisition or applying for a mortgage. Lenders and other financial institutions charge the borrowers for the fees used during the processing of their loan, assessment of their unique situations, and closing the application.
  2. The other classification includes costs involved with owning property. These are fees which you incur by owning a home. Here’s an understanding of each closing cost.

Application fees – These costs cover the expenses that lenders incur when processing your mortgage loan. It is essential to consult your potential lender and have an explicit understanding of the fees they charge. Application expenses vary from lender to lender and usually include items like credit checks and appraisals.

Property Tax – If you use a loan servicer for financing the home purchase, your third-party lender will want you to clear any property tax within 60 days following the acquisition. Clearance of this amount should happen during closing.

Homeowners’ Insurance – This cost covers the processing of home insurance. The policy protects you from incurring expenses in case your property is damaged, broken into, or in case of a fire.

Title search – These costs are paid to a professional title firm for conducting a thorough examination of the real estate documents. The company examines the title deed of the property, ensuring that no individual/ organization can claim ownership of the property.

Private Mortgage Insurance (PMI) – The fee goes to the purchase of insurance, especially if you’ve paid a down payment charge that falls below 20% of the total home purchase price. That said, you need to meet the PMI cost at the closing time.

Sellers’ Closing Costs

With sellers, the significant financial concern during closing would be the real estate commission fee, which is usually split between the real-estate agent and the MLS (Multiple Listing Services) agency. The fee varies, ranging from 5%-8% of the home’s price.

Additionally, sellers need to settle the ownership transfer fee to your homeowner’s association. The ownership shift process indicated the cleared dues, other pending dues, and copies of the association’s financial documents, as well as other relevant papers.


When purchasing a home, it is critical to have a budget that also includes a contingency for closing costs — understanding the costs that you incur as the home buyer makes it easy to plan your finances properly. Nonetheless, always negotiate with the seller for any discounts which may alleviate your financial budget for closing expenses.

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