Buying a home is an exciting milestone, but it also comes with a lot of details to navigate. While most buyers focus on saving for the down payment, it’s just as important to prepare for another key expense: closing costs. These are the fees required to finalize your home purchase, and they can add up quickly if you’re not ready. Understanding closing costs early helps you budget confidently and avoid surprises. Let’s take a closer look at what they are, who pays them, and how you can plan ahead.
What Are Closing Costs?
Closing costs are all the fees and expenses, beyond your down payment, that are paid at the end of the homebuying process, when you officially “close” on your home. These cover a variety of services and third parties involved in the transaction. Together, closing costs generally range between 2% and 5% of the purchase price of your home.
Here’s what they often include:
- Loan origination fee – what your lender charges to process your mortgage.
- Appraisal fee – to confirm the home’s value.
- Title insurance – protects against potential title issues or claims.
- Title search and examination fees – cover the process of verifying the property’s ownership and any liens.
- Closing fee – covers title or attorney closing services.
- Inspection fees – for things like general structure, pests, HVAC, etc.
- Recording fees and transfer taxes – fees paid to the county or city for paperwork and registering property ownership.
- Credit check fee – the lender will likely make their own inquiry.
- Prepaid items – property taxes, homeowner’s insurance, sometimes interest that accrues between closing and your first mortgage payment.
- Homeowner’s association (HOA) or community fees – may need to be prepaid or assessed at closing.
- Doc stamps and intangible taxes (Florida-specific) – In Florida, buyers typically pay state taxes on the deed and mortgage. The doc stamp on the deed is $0.70 per $100 of the purchase price (rates may vary by county), the doc stamp on the mortgage is $0.35 per $100 of the loan amount, and the intangible tax is $2 per $1,000 of the loan amount. These taxes and title-related fees are standard and based on your home’s purchase price or loan amount. As a result, buyers can estimate them early in the process.
Who Pays What
The short answer: both the buyer and the seller share responsibility for closing costs, though the exact breakdown depends on what’s negotiated in the contract and sometimes even special incentives offered by homebuilders or lenders. In most cases, buyers cover expenses tied directly to securing the mortgage and protecting their investment, such as the appraisal, home inspection, loan origination, title insurance, title search and examination fees, closing fees, prepaid taxes and homeowner’s insurance, escrow fees, recording fees, and any lender-specific charges. Depending on negotiations or special promotions offered by the builder, sellers may contribute toward a portion of the buyer’s closing costs, which can make a big difference for first-time buyers looking to reduce upfront expenses.
How to Prepare
To avoid surprises, it’s best to plan ahead. Here’s how:
- Estimate Your Total Costs – Use your expected home purchase price to calculate 2–5% for closing costs, plus your down payment. That way you know exactly how much you need to save. Zillow offers a free online calculator to assist with estimating your closing costs.
- Get a Loan Estimate Early – When you apply for a mortgage, your lender must give you a Loan Estimate. This outlines all estimated costs. Compare it with closing disclosures later so there are no surprises.
- Ask About Builder/Lender Incentives – During your visit to a community, ask whether there are limited-time offers that cover closing costs, offer rate buy-downs, or other financial perks. These specials can sometimes cover part or all of what you’d pay in closing costs.
- Save Enough in Liquid Funds – Having funds accessible (in a savings account, etc.) is helpful, since many closing cost components need to be paid at or before closing, via cashiers’ checks, wire transfers, etc. You can also check out our blog to learn how much money you need to buy a home.
What to Ask When You Tour a Community
When you’re visiting communities or model homes, here are some smart questions to ask related to understanding closing costs. Knowing this early can help you plan:
- “Are there any current specials or builder incentives that cover a portion of closing costs?”
- “Do you have a list of expected fees (inspection, title, escrow, etc.) so I can get a clear estimate?”
- “Are there any HOA, community, or impact fees that will need to be paid at closing or before move-in?”
Final Notes
Understanding closing costs can feel confusing at first, but with a little preparation, you’ll be able to close feeling confident and excited to enjoy your new home. If you’re ready to explore, come visit one of our new home communities throughout the Greater Tampa Bay, Ocala, and Orlando areas and ask about our special incentives.
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