Understanding Closing Costs: A Complete Breakdown

Buying a home is one of the most significant financial decisions you’ll ever make, and understanding closing costs is crucial to avoiding surprises on settlement day. These expenses, which typically range from 2% to 5% of your home’s purchase price, can add thousands of dollars to your final bill. At Kingsway Realty, we believe informed buyers make confident buyers—so let’s break down exactly what you’ll be paying for.

What Are Closing Costs?

Closing costs are the fees and expenses you pay to finalize a real estate transaction. Beyond your down payment, these costs cover everything from legal services to government fees. While some costs are negotiable and others are fixed, knowing what to expect helps you budget accurately and negotiate effectively.

• Loan-Related Fees

If you’re financing your purchase, lender fees will constitute a significant portion of your closing costs. These include loan origination fees (typically 0.5% to 1% of the loan amount), appraisal fees ($300-$600), credit report charges, and discount points if you’re buying down your interest rate. Your lender is required to provide a Loan Estimate within three days of your application, giving you a clear picture of these expenses.

• Title Services and Insurance

Title insurance protects both you and your lender from potential ownership disputes or liens against the property. You’ll pay for a title search to verify the seller’s legal right to transfer ownership, plus title insurance premiums. Expect to pay $500 to $3,500 depending on your home’s value and location.

• Government Fees and Taxes

Recording fees ensure your deed and mortgage are properly documented with local authorities, typically costing $50 to $250. Transfer taxes vary significantly by state and municipality—some areas charge nothing, while others impose taxes exceeding 2% of the purchase price. Property taxes may also be prorated at closing, with you reimbursing the seller for any prepaid taxes.

• Inspection and Survey Costs

A professional home inspection ($300-$500) is essential for identifying potential issues before you commit. Home size, age, location, and the need for additional services such as radon or termite testing will influence the final price. In some areas, you may also need a property survey to verify boundaries and easements, adding another $350-$600 to your costs. 

• Escrow and Prepaid Items

Lenders often require you to establish an escrow account for property taxes and homeowners insurance. At closing, you might prepay several months of these expenses, plus homeowners insurance premiums, flood insurance (if applicable), and prepaid interest covering the period between closing and your first mortgage payment.

• Attorney and Agent Fees

Pennsylvania does not require an attorney to be present at closing, but some states do. Depending on your state, you may incur attorney fees ranging from $500-$1,500. While the seller typically pays real estate agent commissions, it’s important to understand how these fees factor into the overall transaction.

Tips for Managing Closing Costs

Your Kingsway agent is well-connected and can help you shop for a mortgage lender, compare institutions, and understand the process. Closing costs can vary significantly between institutions, so it’s wise to compare offers from multiple lenders. Ask lenders about a “no-closing-cost” mortgage, where fees are rolled into your loan or offset by a higher interest rate.

You’ll receive a Closing Disclosure a few days before settlement. Compare it carefully against your Loan Estimate to catch any unexpected increases and ask your Kingsway agent about anything that you’re unsure of or that doesn’t seem right.

Kingsway Realty: Where Excellence Meets More Experience

Understanding closing costs removes the mystery from one of home buying’s most confusing aspects. At Kingsway Realty, our experienced agents guide you through every step, ensuring you’re prepared financially and emotionally for your closing day. 

When it comes to buying, selling, or investing in Central Pennsylvania real estate, Kingsway Realty stands apart. From residential homes to commercial ventures and land acquisitions, our team provides unmatched expertise that consistently delivers results you can count on.

With decades of service to our community, we’ve built our reputation one successful transaction at a time. Our track record isn’t just impressive—it’s a testament to the trust families and businesses place in us, generation after generation.

Contact us today to discuss your home buying goals and get personalized guidance on your next real estate transaction.