Very often buyers come to the closing table to buy the house of their dreams and there is an unpleasant surprise waiting for them. A survey by ClosingCorp of 1,000 first time home buyers revealed that 17% were surprised that there were any closing costs, and 35% were surprised at how high the closing costs were. Wow, someone is not communicating.

 These buyers got the news that it cost money to borrow money, and then other costs were added to the transaction, and they were caught by surprise. What buyers need to understand, and they should be told by the professionals, is that there are additional costs to buying a home over and above the price of the house.

When a buyer is paying cash, the closing costs are minimal. Very often under $1500. When purchasing a home for, let's say, for $250,000, costs to consider include the following.

Bank Fees, such as loan origination, loan discount or other fees unique to that lender

Title Insurance

Credit Report


Appraisal Fee

Termite Inspection

Home Inspection

Deed Recording

Balance of HOA or condo Fees for the month

Doc Stamps

Homeowner's Insurance

And others as well.

It is incumbent on the lender to provide the information well ahead of closing to their buyers that there will be fees above simply the cost of the house. It can be embarrassing for a buyer to sit at the closing table and not be aware of these charges. The lender and the real estate agent should have disclosed these fees to the buyers so they are  prepared and know well in advance.

Fannie Mae has estimated that closing costs run between 2% and 5% of the purchase price of a house. It is good for the buyer to be aware that if purchasing a home for $250,000, they may need to come up with as much as $12,500 in cash, above the down payment, to have a successful closing.

In order to avoid unpleasant surprises like this, buyers need to work with reputable lending institutions that encourage buyers to ask questions. And real estate agents ought to provide every buyer an estimate of closing costs well ahead of the closing date. This estimate is not a binding document, however, it does notify the buyer that there are costs involved when buying a home. A professional real estate agent will be careful and the estimate in most cases, will be very close to the final amount actually due for closing. 

Buyers should obtain wire instructions directly from the title company so that all funds are wired a day or two in advance of closing. This will eliminate delays at closing, as well as embarrassment.

An informed buyer is a great buyer who will have a good experience.