Closing costs: the hidden tax of homebuying

When you buy a house, the down payment is only part of what you need to bring to the closing table. Closing costs — the fees for processing and executing the transaction — typically add 2–5% of the purchase price. On a $400k house, that's $8,000–$20,000 on top of whatever you put down.

What's in the bill

• Loan origination fee (0.5–1% of loan amount)
• Appraisal fee ($400–700)
• Title insurance (0.5–1% of purchase price)
• Title search and settlement fees
• Attorney fees (if required in your state)
• Recording fees and transfer taxes (varies wildly by state)
• Prepaid property taxes and homeowners insurance
• Escrow deposits (typically 2 months of taxes + insurance)
• HOA transfer fees, if applicable
• Survey, inspection, pest inspection (sometimes)

Rolling them into the loan

Some lenders offer to roll closing costs into your loan balance. That keeps more cash in your pocket at closing, but you'll pay interest on those costs for 30 years. The math is usually better if you pay them in cash, but 'better' isn't 'affordable' — if rolling them in is the only way you can close, it's still better than not closing.