Purchasing a home is a major financial decision, and while many buyers think they’ve accounted for all the expenses, hidden closing costs often come as an unwelcome surprise. According to the 2024 Zillow Consumer Housing Trends Report, 91% of buyers encountered at least one unexpected fee during closing.

Let’s take a look at some common fees you might not be aware of, so you can head into closing fully prepared.

1. Loan Origination Fee

For many buyers (66%), the loan origination fee is one of the most surprising charges at closing. This fee covers the lender’s costs of processing the loan and usually ranges from 0.5% to 1% of the loan amount. Depending on your loan size, this can add thousands of dollars to your total costs.

It’s wise to ask your lender about this fee upfront. Some lenders may be open to negotiating a portion of the fee, especially if you’ve done your homework and compared multiple offers.

2. Appraisal Fees

An appraisal ensures the home’s value matches the loan amount, but 54% of buyers didn’t anticipate this out-of-pocket cost. Appraisals typically cost between $300 and $500, but the exact amount can vary based on the home’s size and location.

3. Title Transfer Taxes

Another cost that frequently surprises buyers is the tax required to transfer the title from seller to buyer. More than half (54%) were caught off guard by this expense, which varies depending on where you live. In some places, it’s a flat fee, while in others, it’s a percentage of the home’s value.

4. Title Insurance and Search Fees

While many buyers understand the importance of title insurance to protect against ownership disputes, 51% didn’t expect the associated fees to be part of their closing costs. Title insurance and the search to ensure clear ownership are crucial in protecting your investment, but they can sometimes get overlooked when budgeting for closing.

5. Higher Closing Costs Than Expected

The report found that 42% of buyers were surprised by their overall closing costs, which include various fees like attorney and recording fees. First-time buyers were particularly shocked, with 49% saying their final costs exceeded expectations.

Closing costs typically range between 2% and 5% of the home’s purchase price, so it’s important to budget accordingly. Early in the process, request a Loan Estimate from your lender, which outlines these costs. Later, you’ll receive a Closing Disclosure that provides the exact amounts three days before closing—be sure to review it carefully.

Tips to Avoid Surprises at Closing

Here are a few strategies to help you avoid unexpected costs:

• Ask Early: Don’t hesitate to ask your lender and real estate agent about all potential fees at the beginning of the process. It’s better to be overprepared than surprised later.
• Shop Around: Whether for title services or closing costs, compare providers to make sure you’re getting a fair rate.
• Have a Cushion: Plan for extra expenses in your budget. Having a little financial wiggle room can make a world of difference.

Closing on a home is exciting, but unexpected fees can dampen that joy if you’re not prepared. By understanding and planning for these hidden costs, you can approach closing day with confidence. Whether it’s your first home or your fifth, having all the details in place will make the experience as smooth as possible.