Buying a home in Kentucky comes with more than just the price tag – you’ll also need to consider closing costs. Closing costs are the final expenses that need to be paid in order to close on a real estate transaction, such as taxes, lender fees, and title insurance.
In this Redfin article, we’ll cover how much closing costs are in Kentucky, who typically pays for them, and what you can expect to pay as a buyer or a seller. From lender 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.
How much are closing costs on average in Kentucky?
In addition to the down payment, homebuyers will also need to pay closing costs before securing the keys to their new home. Closing costs in Kentucky range anywhere from 2%-5% of the home’s purchase price. But it’s important to remember that this is just a range and the total amount will depend on numerous 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, which has a median sale price of $329,475 closing costs could range anywhere from $6,590 to $16,474. Or, let’s say that you’re buying a home in Louisville, which has a median sale price of $267,000. Closing costs for a home here could cost you anywhere between $5,340 and $13,350.
Who pays closing costs in Kentucky?
So, who pays for closing costs in Kentucky? In most transactions, both the buyer and seller will pay closing costs. But, each party’s closing costs amount will vary depending on what they are required 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.
Buyer closing costs in Kentucky
For homebuyers in Kentucky, you can expect to pay between 2%-5% of the purchase price. If you paid earnest money, this amount will be subtracted from your closing costs, which will reduce the total amount you owe at closing. Earnest money is typically between 1%-3% of the home’s price. Let’s break down some of the common closing costs covered by the buyer:
- Appraisal fee: Home appraisals, which typically range from $300 to $500, are usually paid for separately at the time of the service. However, if not, you’ll need to pay for this at closing.
- Inspection fee: Home inspections generally range from $300 to $500 – they can vary based on local rates and the property’s specific characteristics. If you don’t pay for the inspection at the time of service, this will need to be paid at closing.
- Loan origination fee: Your lender may charge a fee for creating your loan. It’s important to inquire about what this cost covers and whether it’s negotiable to potentially avoid high costs.
- Loan processing fee: Lenders may also charge a loan processing fee, covering underwriting and related services. Similar to the origination fee, check with your lender to understand its purpose and possible waivers.
- Loan discount points: If you’ve purchased points to lower your interest rate, you’ll usually pay a one-time fee at closing. Each point can lower your rate by 0.25% to 0.5%. Consider your long-term plans, such as how long you plan to own the home or if you plan to re-finance, before purchasing points.
- Private mortgage insurance (PMI): When your down payment is under 20%, you’re typically required to pay PMI. Some loans allow upfront PMI payment at closing, giving you the choice between higher upfront costs or increased monthly payments.
- Title insurance: Title insurance is a one-time closing cost, with buyers commonly paying for both lender and owner policies.
- Homeowners insurance: In Kentucky, your annual homeowner’s insurance premium may be part of your closing costs.
- Homeowners Association dues: For homes in HOA-managed communities, you might have to pay one month’s dues at closing, which can vary depending on the property and covers maintenance and operational expenses.
- Property taxes: As part of closing costs in Kentucky, you may be required to prepay a portion of your property taxes at closing.
Seller closing costs in Kentucky
The closing costs covered by sellers in Kentucky can vary, but here are a few common closing costs that sellers pay for:
- 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 their agent.
- Homeowners Association fees: If the property is part of an HOA, the seller may need to pay a variety of fees. These can include HOA transfer fees, outstanding dues, and possibly a fee for obtaining HOA documents required by the buyer. The exact fees will depend on the HOA’s rules and regulations.
- Property taxes: Sellers are responsible for any property taxes that have accrued but not yet been paid up to the closing date. These unpaid property taxes are typically prorated for the months that you owned the property.
- Title insurance: Sellers typically cover the cost of the buyer’s owner’s title insurance policy. 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 generally based on the home’s sale price.
- Transfer taxes: If you’re selling a home in Kentucky, you can expect to pay a state levied real estate transfer tax. These taxes are typically calculated based on the sale price or assessed value of the property. The specific rates and regulations can vary widely, so it’s important to be aware of the requirements in your area and factor in these potential costs when selling a home.
Median home sale price data from the Redfin Data Center during July 2024.
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