Buying a home is an exciting milestone, but beyond your down payment – there’s another important expense to plan for: closing costs. Understanding what they are, how much it may cost you, and what’s included can help you avoid surprises and feel confident on closing day.

What Are Closing Costs?

Closing costs are the fees and expenses required to finalize your mortgage and complete your home purchase. These costs are separate from your down payment and are typically paid when you officially “close” on your home and receive the keys.

They cover everything from lender and title services, to appraisal fees, escrow, legal paperwork, and local county property-related recording and notary expenses that ensure the transaction is secure and legally complete.

How Much Are Closing Costs?

Most homebuyers can expect closing costs to range from 2% to 5% of the home’s purchase price.

For example:

• $250,000 home → approximately $5,000 to $12,500
• $350,000 home → approximately $7,000 to $17,500

The exact amount also depends on factors such as:

• Location
• Loan type
• Lender fees
• Property taxes and local regulations

What Do Closing Costs Include?

Closing costs are made up of several categories. While they will vary by transaction, below are the most common ones:

1. Lender Fees

Charged by your mortgage lender for processing your loan:

• Loan origination fee
• Application and underwriting fees
• Credit report fee

2. Property-Related Fees

Ensures the home is properly valued and legally transferred:

• Appraisal fee
• Title search and title insurance
• Survey fees (in some cases)

3. Government & Legal Fees

These fees are tied to recording by your local government and transferring ownership:

• Recording fees
• Transfer taxes
• Attorney fees (required in some states)

4. Prepaid Costs

Any upfront payments for ongoing homeownership expenses:

• Property taxes
• Homeowners insurance
• Prepaid interest

These prepaid items aren’t necessarily “fees,” they’re typically expenses that are initially collected upfront at your closing.

Who Pays Closing Costs?

Both buyers and sellers will have closing costs, but buyers typically will pay the majority of loan-related fees, while sellers usually often cover agent commissions and potentially some taxes.

In some cases, you may be able to negotiate:

• Seller concessions (the seller covering certain costs)
• Lender credits
• Local or state assistance programs

Be sure to discuss this with your lender and your real estate attorney throughout the homebuying process, so that you will be informed and prepared along the way.

When Are Closing Costs Paid?

Most closing costs are due on closing day, when you sign your final paperwork.  However, a few expenses like the appraisal or a credit check, may be paid earlier on in the homebuying process.

How to Prepare for Closing Costs

Planning ahead can make a big difference. Here’s how to stay prepared:

• Review your Loan Estimate & Closing Disclosure to understand the expected costs
• Budget beyond your down payment
• Shop around for lenders and servicing providers
• Ask about assistance programs if you’re a first-time buyer
• Negotiate where possible

Even small differences in fees can add up to significant savings.

We’re Here For Your Homebuying Needs

Closing costs are a normal and important part of buying a home. While they can feel overwhelming at first, understanding what’s included and planning ahead will help you move through the mortgage process with confidence.

At First Financial, we’re here to guide you on your homebuying journey every step of the way, from pre-approval to closing day – so there are no surprises, just smart financial decisions. If you live, work, worship, volunteer, or attend school in Monmouth or Ocean Counties in NJ and would like to learn more about the homebuying process or schedule a call with one of our mortgage experts with no commitment required, start here.

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