First-Time Home Buyers: Be Prepared for Closing Costs
Closing costs for first-time home buyers typically range from 2% to 6% of the purchase price, and you pay them on top of your down payment. On a $300,000 home, that works out to roughly $6,000 to $18,000.
A first-time buyer often saves for months to reach the down payment, and then a second number shows up near the end. Choice Homes is a Chattanooga real estate team of 55 agents, brokered by eXp Realty, and we help buyers across Tennessee and North Georgia get ready for that number early. We walk our own clients through five steps.
Know your number before you make an offer
Those steps start with one figure: 2% to 6% of the price you agree to pay. Where you land in that range depends on your loan type, your lender, where the home sits and how much it costs. Your lender can give you a more precise estimate once you apply.
| Purchase price | At 2% | At 6% |
|---|---|---|
| $200,000 | $4,000 | $12,000 |
| $300,000 | $6,000 | $18,000 |
Add your low and high numbers to your down payment. That is your rough idea of the cash you will need on the day you sign. A mortgage calculator shows you the monthly side of the picture, but this money is due all at once.
We like to run that math at the top of your price range, not the middle. If the bigger figure still works for you, then every house you tour is one you can afford.
Learn what goes into the bill
Once that figure feels real, the next question is what it buys, because the total is a stack of smaller items.
| Group | What it covers |
|---|---|
| Lender fees | Processing, origination (about 1% of the loan), underwriting, a credit report and optional discount points |
| Third-party fees | The appraisal (around $700), a credit check (about $50), the title search and title insurance |
| Government fees | Local recording fees ($50 to $250) and transfer taxes |
| Prepaid expenses | Your first homeowners insurance premium, property taxes and daily interest paid ahead |
| Escrow deposits | Starter money in an account your lender uses for future tax and insurance bills |
Many buyers miss this detail: the last two rows are your own future bills, paid early, so they rarely shrink. The lender and third-party rows are where you have room to shop and push back.
One more tip: ask an insurance agent for a quote as soon as you are under contract, since that premium is usually due before or at the closing table.
Compare Loan Estimates line by line
That insurance quote is one price you can shop early, and the loan is another. Every lender has to give you a standard 3-page Loan Estimate within three business days of your application. It shows the rate, the monthly payment and each fee in the same layout, so you can lay two or three side by side.
We suggest getting at least three. Lender fees on the same loan can differ by $2,000 to $5,000, while the outside fees tend to look alike from one lender to the next. Start with the origination section, because that is where the gaps show up.
And keep the long view, since a low rate with heavy fees can cost more over time.
Find ways to lower or cover the cost
Even with the best estimate in hand, a few thousand dollars can still feel heavy, and most first-time buyers have more ways to lower it than they expect.
| Option | Best fit | Tradeoff |
|---|---|---|
| Seller concessions | You have room to negotiate | Capped at 3% to 6% depending on loan type; FHA allows 6%, VA allows 4% |
| Assistance programs | You meet the first-time buyer rules | Extra paperwork and eligibility limits |
| Lender credits | You are short on cash | A higher rate for as long as you keep the loan |
| Rolling fees into the loan | You need less money upfront | You pay interest on a bigger balance |
| Closing near month end | Your move date is flexible | Less choice on timing |
Seller concessions go into your offer. And we can help you negotiate them. Assistance can come as local or national grants or forgivable loans, and you do not repay a grant. Timing matters too: closing on the 28th means you prepay 2 to 3 days of interest instead of 25 to 30.
Check the Closing Disclosure and plan how you will pay
With a lender chosen and any help lined up, the last weeks bring your final figures. They arrive on the Closing Disclosure, which you must receive at least three business days before you sign. Put it next to your Loan Estimate and ask about anything that moved.
Next, sort out the payment itself. Most buyers bring a certified check or send a wire, and your lender may want the funds sitting in your account for at least 60 days. Ask your lender which one they accept, so you can set it up with your bank ahead of time. If family is giving you gift money, tell your lender early.
Call your lender the week before you sign and confirm the exact amount and how they want it sent. Five minutes on the phone can save you a stressful morning.
Frequently asked questions
By that last week, most buyers still have a question or two. These are the ones we hear most.
How much are closing costs for a first-time buyer?
They typically run 2% to 6% of the purchase price, paid separately from your down payment.
Can the seller pay my closing costs?
Yes. You can ask for seller concessions in your offer, capped at 3% to 6% of the price depending on your loan.
Can I roll closing costs into my mortgage?
Sometimes. You bring less cash to the table, but you pay interest on the added amount or take a higher rate.
Is there help for first-time buyers?
Yes. Local and national grants and forgivable loans can help cover these costs if you qualify.
Plan your closing costs with our team
If your question is not on that list, ask us before you start touring. We will help you estimate what you will owe, negotiate with the seller and stay in touch with your lender all the way to the closing table.
Call (423) 243-3198