The Truth About Closing Costs (and How to Budget for Them)

1. What Are Closing Costs?

Closing costs are the fees and expenses you pay when finalizing a real estate transaction — whether you’re buying or selling a home.They cover everything from lender fees and title services to property taxes and insurance.

In short: Closing costs are the true cost of sealing the deal.And while they often catch first-time buyers off guard, they’re completely manageable with the right preparation.

2. How Much Are Closing Costs, Really?

In most cases, buyers can expect to pay 2% to 5% of the home’s purchase price in closing costs.

Example:

• On a ₱10 million home, that’s roughly ₱200,000 to ₱500,000 in fees.

Sellers also have their own closing costs — typically 5% to 7%, which usually includes the agent commission and any agreed-upon credits to the buyer.

3. Common Closing Costs for Buyers

Here’s what typically makes up your closing costs:

🏦 Lender Fees:

• Loan origination or underwriting fee

• Credit report and document processing

• Discount points (if buying down your rate)

📑 Title & Escrow Fees:

• Title search and title insurance

• Escrow or closing agent fee

🏠 Property-Related Costs:

• Appraisal fee

• Home inspection (if not already paid earlier)

• Property survey (for boundary confirmation)

💡 Prepaid Expenses:

• Property taxes

• Homeowner’s insurance premium

• Mortgage interest (for the first month)

💰 Government & Recording Fees:

• Transfer taxes

• Deed recording fee

• Notary charges

Pro tip: Ask your lender for a Loan Estimate early in the process — it breaks down all expected fees line by line.

4. Closing Costs for Sellers

Sellers have fewer line items but higher total expenses due to commissions and taxes.

Typical seller costs:

• Realtor commissions (usually 5–6% of sale price)

• Title and escrow fees

• Transfer taxes and local recording fees

• Any agreed-upon repairs or credits to the buyer

• Mortgage payoff balance (if applicable)

Smart move: Request a Net Sheet from your realtor — it estimates how much you’ll walk away with after fees.

5. Can You Negotiate Closing Costs?

Yes! Many buyers don’t realize that some fees are flexible.

Negotiation options:

• Ask the seller to cover part of your costs (especially in a buyer’s market).

• Shop around for title and insurance services — prices vary.

• Compare lenders’ origination and underwriting fees before locking in your mortgage.

Even small savings add up — trimming ₱20,000–₱50,000 can make a big difference.

6. How to Budget for Closing Costs

Don’t let these expenses surprise you. Build them into your early budgeting plan.

Smart budgeting tips:

1. Use the 5% rule: Estimate 5% of your home’s price for closing — better to overestimate than scramble later.

2. Save early: Add a “closing cost” line in your savings goal alongside your down payment.

3. Ask about incentives: Some lenders or new developments offer credits toward closing costs.

4. Be ready for last-minute adjustments: Taxes and insurance can change based on timing and location.

7. What Happens at the Closing Table

At closing, you’ll sign final loan documents, pay your closing costs, and receive your keys (or funds if you’re selling).

Bring with you:

• A government ID

• Proof of insurance

• Certified or cashier’s check (if paying manually)

Fun fact: Digital closings are becoming more common, making the process faster and easier than ever before.

✨ Final Thoughts

Closing costs may not be glamorous, but they’re an essential part of every real estate transaction.By understanding where your money goes — and planning ahead — you’ll step into closing day confident, prepared, and stress-free.

Whether you’re buying your first home or selling your fifth, transparency and preparation are the true keys to a smooth closing.