In the mortgage business, “closing” refers to the moment at which a property’s title passes hands — the moment at which the buyer officially gains a home. Closing costs are, then, the fees that accompany this process.

What do these costs cover?

Closing costs will cover application and underwriting fees for lenders, attorney fees, survey fees, the costs of an appraisal (where relevant), a home inspection, and transfer fees for home owners associations. Flood, pest, and recording fees are part of the closing costs as well. The closing costs will also include property taxes and insurance — often home owners’ insurance, mortgage insurance, and title insurance. The details will vary from state to state, as well as from one situation to the next.

Can these costs get expensive?

The closing fee or escrow fee is, of course, another essential part of closing costs. These are the fees paid to the independent third-party (escrow agent) who will oversee your closing process. This will often be an attorney. That attorney relationship will be essential to you getting the results and an outcome that aligns with your initial expectations of investment.

Closing costs are also important when dealing with the property’s overall cost in your budget. Sticking to your budget can be very difficult for most homeowners. Luckily, with that professional consultation and assistance, you’ll see the difference made. Otherwise, you’ll largely be on your own in the most important stage. Closing the deal and passing off ownership is often where the most hiccups happen.

Similar to sales in general, you’ll see the most questions or issues come up when the checkbook comes out. You’ll have to be prepared for this and acknowledge how closing cost will potentially shift the outlook of your budgeting. Try to stay as close to the budget you set out as possible. This will be far more likely with professional consultation and assistance in general. Without that added help, you may feel lost at times. This feeling of being lost will also have a lot to do with how the market is at the time of sale.

Consider the market

If the market is highly competitive at the time for buyers vs sellers, you should adjust as such. Then, you’ll be more prepared for whatever is thrown at you. You’d be shocked to see how much the market can manipulate your results. The reality of it being a buyers market vs a sellers market is a very real thing that you’ll get to know through the process.

How do you know where the market is currently?

You can do research on your own. Luckily, when you have professional help, you’ll be far more familiar with where the market stands. They’ll be on top of how everything is going in your area.

While total closing costs will depend on many factors, they are likely to amount to between two and five percent of a property’s price. Some fees are avoidable, but because they will serve the buyer’s financial security, you are advised to consult an attorney if you have questions.