The first thing most homebuyers think about is saving for the down payment on their new home - which is typically 3 - 5% of the purchase price, but could be 0% for FHA-eligible buyers. But in addition to the down payment, prospective homebuyers often neglect to consider the closing costs associated with buying a property.

Closing costs represent a significant amount of money - sometimes as much as the actual down payment. In Georgia, you can expect closing costs to be a little more manageable than in other states. Here’s everything you need to know.

What are Closing Costs?

Closing costs are the fees paid by the buyer and the seller when a home is sold. These fees typically need to be paid upfront - in other words, they can’t easily be rolled into your loan balance the way your down payment can.

It’s very difficult to determine your exact closing costs until you have a home in mind because many of the fees are dependent on the specific home.

Who pays for Closing Costs in Georgia?

While both the buyer and the seller pay for closing costs in Georgia - they are each responsible for different costs. If you're a buyer, scroll down to see the 5 categories of closing costs that you'll be responsible for paying at closing. If you're a seller, you're mostly responsible for the agents' commission and prorated property taxes for the time you occupied the house during the year in which you're selling.

How Much are Closing Costs in Georgia?

If you’re interested in getting a rough estimate of your future closing costs, in Georgia home buyers spend an average of 2.0 - 2.5% of the purchase price. The median home price in Georgia is $312,000.  Given 2.0% in closing costs, you could owe about $6,240 in closing costs. Here are the line items that account for buyer paid closing costs:

1. Lender Fees

Depending on your lender, they’ll either charge you one origination fee for your mortgage or list them out in individual amounts like:

• Mortgage Processing Fees
• Appraisal Fee
• Courier Fees
• Credit Check Cost
• Flood Certification
• Lender Title Policy

In some cases, it may also make sense to request discount points from your lender, which would lower your interest rate but would also need to be paid as a closing cost.

2. Title Fees

Before you take over title of a house, you want to be sure that no one will be able to challenge your ownership later on. Imagine if the former owner had a lien and a lender was able to prove that the house was actually theirs because of it. You could be in for a lengthy and very expensive court case in order to keep the house.

This is why you want to pay for title insurance during closing. The insurance company will do rigorous research to ensure your claim to the house will never be successfully challenged once you close. If you're taking out a loan, you’ll also be required to buy the lender a title insurance policy for similar reasons. They, too, want peace of mind knowing that their borrower will never be stripped of their collateral.

Title fees will probably represent a large amount of your total closing costs as the buyer, so be sure to shop around. And remember that the "owner's title policy" is an optional insurance policy that you do not have to purchase.

3. Third-Party Fees

Any number of third parties may be involved in the purchase of a home, each of which will charge a fee for their services. Some examples of these fees include:

• Credit Report Fee
• Mortgage Insurance Premium (if your down payment is less than 20%)
• County Transfer Taxes (for recording the deed)

4. Homeowner Association Fees

Becoming a homeowner in a neighborhood that is governed by an HOA comes with financial obligations. While these fees are usually assessed annually, they are often charged monthly or quarterly with a portion of the money then collected upfront at the time of closing.

5. Escrowed Property Taxes and Homeowners Insurance

Homeowners insurance is typically collected at the time of closing for at least the remainder of the year in which you close. Other insurance companies require an entire first year premium to be collected at the time of closing.

Property taxes are typically escrowed, which means they are paid monthly as part of your mortgage payment. The closing attorney or title company will require that the balance of the prorated current year property taxes be paid at the time of closing.

How to reduce your closing costs

As a buyer, you can actually negotiate seller paid "contributions" towards your closing costs. Naturally, this is something the seller often will not want to do - so, you'll have to consider market conditions, days on market, asking price and other factors when attempting to request that the seller contribute towards your closing costs.

If the market favors you, as the buyer, the seller may be open to covering some of the earlier mentioned fees as a way to make the purchase more attractive. Conversely, in a multiple offer scenario, the seller is unlikely to entertain paying for your closing costs.

You can also offer over asking price and bake in closing costs in order to reduce your need to come up with the cash at closing. For example, if the asking price is $400,000 you could offer $405,000 with $5,000 cash paid towards your closing costs. Generally the seller will treat this the same as a $400,000 offer with $0 in paid closing costs.

How can I estimate my closing costs?

The best way to get a more accurate closing cost estimate is to meet with your Realtor and/or mortgage advisor. They can help you come up with these numbers based on the purchase price range you're shopping in. For a rough estimate, 2.0% is a good number to use:

• For a $350,000 home, you'd pay approximately $7,000 in closing costs in Georgia
• For a $600,000 home, you'd pay approximately $12,000 in closing costs in Georgia

The Easiest Way to Put $5k Toward Your Closing Costs

At SimpleShowing, we’re also very proud to offer help with closing costs to buyers who use our program to connect with a real estate agent and find their perfect home.

Upon closing, home buyers who purchase any home with a SimpleShowing agent can get $5,000 on average towards closing cost with our Buyer Refund Program!