What Are Closing Costs? Part 3: The Bottom Line

home buyer closing costs reno

What are closing costs? Part 3: The Bottom Line

Part three of this five part series on closing costs covers what you can expect to pay at the closing table. This series is prefaced with the fact that many closing costs are negotiable and customary costs can differ from city to city. This series is a general overview of what to expect at the closing table. The breakdown of your closing costs can be found at Part 1: Recurring Closing Costs and Part 2: Non-Recurring Closing Costs.

As we’ve learned in the previous closing cost posts the total closing cost amount is a combination of recurring and non-recurring closing costs.

Buyer: “So my total out of pocket costs to buy this home are recurring closing costs + non-recurring closing costs. Great let me get my checkbook.”

Agent/Lender: “Well, the total amount of closing costs you have accumulated will be paid at the closing table but there is another payment we need to add to your list… the down payment.”

Barring special financing or a VA loan you will have to provide a down payment for your lender to give you a loan. In FHA, the amount is 3.5% of the purchase price. For conventional loans  on primary residences or second/vacation homes the amount can range from 10% to whatever higher amount you’re willing to put down.

For this example, we will use an FHA loan.

The purchase price for 123 Main Street is $100,000. You should have already put down some amount of earnest money so we will use $1,000. Again, your closing costs will vary depending on what you have incurred but we will say you’re total costs came to 3.25% of the purchase price. Below is what you will need to pay at closing.

Down Payment $100,000 x 3.5% $3,500
Closing Costs $100,000 x 3.25% + $3,250
Earnest Money $1,000 already deposited –  $1,000
Total to Pay at Closing $5,750

I know what you’re thinking, “Just tell me what I have to pay instead of giving an example.” The fact of the matter is there are many variables and deciding factors that go in to what you’re total closing payment will be.

To get a more detailed look at your potential closing costs contact your lender or real estate agent and ask for a Good Faith Estimate or Estimate Net Sheet.


Still confused or wondering what this all means for buying a home? Feel free to call or email me with your real estate questions.

Check back for Part 4: I Can’t Afford The Closing Costs

To reduce liability from the sue happy: This is not intended to be a complete list of your closing costs. Your actual fees may be different as negotiated in your contract. Read your Purchase agreement and your lender’s documents carefully and make sure you understand the terms. You’re advised to consult  legal counsel, a CPA, or financial advisor.

Ricky Beach

Managing Broker/RealtorŪ CDPE, SFR

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