There’s more to buying a home in Kentucky than just the price tag – you also need to consider closing costs. Closing costs are the final fees paid to complete a real estate transaction, such as taxes, lender fees, and title insurance.
In this Redfin article, we’ll go over how much closing costs are in Kentucky (who typically pays them), and what you can expect to pay as a buyer or seller. From loan fees to insurance, we’ll break down what you need to know to budget wisely and make your home buying process as smooth as possible.
What are the average closing costs in Kentucky?
In addition to a down payment, homebuyers also need to pay closing costs to get the keys to their new home. Closing costs in Kentucky are approximately 2%-5% of the home purchase price. But it’s important to remember that this is just a range and the total amount will depend on many factors, such as the purchase price of the home, the type of loan and any adjustments negotiated with the seller.
For example, if you’re buying a home in Lexington, where the average sales price is $329,475, closing costs may range from $6,590 to $16,474. Or, let’s say you’re buying a home in Louisville, where the median sales price is $267,000. Closing costs on a home here can cost you between $5,340 and $13,350.
Who pays closing costs in Kentucky?
So, who pays the closing costs in Kentucky? In most transactions, the buyer and seller will pay closing costs. However, the amount of closing costs for each party will vary based on how much they need to pay. Keep in mind that it’s common for the buyer to pay closing costs out of pocket, while the seller’s closing costs are deducted from the home sale proceeds.
Kentucky buyer closing costs
For Kentucky home buyers, you can expect to pay 2%-5% of the purchase price. If you pay a deposit, this amount will be deducted from your closing costs, which will reduce the total amount you owe at closing. The deposit is usually 1%-3% of the house price. Let’s take a closer look at some common closing costs that buyers pay:
- Appraisal fee: Home appraisals typically range from $300 to $500 and are usually paid separately at the time of service. However, if not, you will need to pay a fee at closing.
- Inspection fee: Home inspection fees generally range from $300 to $500, with costs varying based on local rates and the specific characteristics of the property. If you did not pay for the inspection at the time of service, you will need to pay it at closing.
- Loan origination fee: Your lender may charge a fee to create your loan. It’s important to understand what this fee covers and whether it can be negotiated to avoid high fees.
- Loan processing fee: Lenders may also charge a fee for loan processing, including underwriting and related services. Similar to the origination fee, check with your lender to understand its purpose and possible exemptions.
- Loan discount points: If you buy points to get a lower interest rate, you’ll usually pay a one-time fee at closing. Each point can lower your rates by 0.25% to 0.5%. Before purchasing points, consider your long-term plans, such as how long you plan to own the home or whether you plan to refinance.
- Private Mortgage Insurance (PMI): When your down payment is less than 20%, you usually have to pay PMI. Some loans allow PMI to be paid upfront at closing, giving you the option of a higher upfront cost or increased monthly payments.
- Title Insurance: Title insurance is a one-time closing cost, and the buyer usually pays for both the lender and the owner’s policy.
- Home Insurance: In Kentucky, your annual homeowners insurance premium may be part of your closing costs.
- Homeowners Association Dues: For homes in HOA-managed communities, you may be required to pay one month’s dues upon closing, which may vary by property and cover maintenance and operating expenses.
- property tax: As part of your Kentucky closing costs, you may be required to prepay a portion of your property taxes at closing.
Kentucky Seller Closing Costs
The closing costs that sellers pay in Kentucky can vary, but here are some common closing costs that sellers pay:
- Real estate agent commission fees: These fees can be a significant cost for sellers. Commission fees may vary and are subject to negotiation. Sellers should discuss their options with an agent.
- Homeowners Association Fees: If the property is part of an HOA, the seller may be required to pay various fees. These fees may include HOA transfer fees, outstanding payments, and fees that may be incurred to obtain the HOA documents required by the buyer. The exact fees will depend on the HOA’s rules and regulations.
- property tax: The seller is responsible for any property taxes accrued but not yet paid prior to the closing date. These unpaid property taxes are usually prorated based on the months you owned the property.
- Title Insurance: The seller usually bears the cost of the buyer’s owner’s title insurance. This policy protects the buyer from any potential title issues that may arise after the property is sold. The cost of title insurance can vary, but is usually based on the sales price of the home.
- Transfer tax: If you sell your home in Kentucky, you’ll need to pay state-imposed real estate transfer tax. These taxes are usually calculated based on the property’s sales price or assessed value. Specific rates and regulations can vary widely, so it’s important to understand the requirements in your area and consider these potential costs when selling your home.
Median home sales price data from the Redfin data center for July 2024.
