Closing costs are the fees you pay to finalize your home purchase, and they are separate from your down payment. In Western New York, buyers should expect to pay roughly 2 to 5 percent of the purchase price in closing costs, which translates to thousands of dollars on top of your down payment. The surprise factor is real. Even experienced agents admit they have been caught off guard by closing costs. But with a little planning, you can budget for them and avoid any last-minute sticker shock.

Here is what Western New York buyers need to know about closing costs and how to plan for them.

Key Takeaways

• Closing costs in New York typically run 2 to 5 percent of the purchase price for buyers.
• On a $200,000 home, expect $4,000 to $10,000 in closing costs.
• Attorney fees in Western New York typically range from $800 to $1,500.
• A home inspection in the Buffalo area costs around $300 to $500.
• New York State charges a transfer tax of 0.4 percent of the sale price, which is typically paid by the seller.
• Assistance programs like SONYMA and FHLBNY grants are available to help qualifying buyers with closing costs.

What Are Closing Costs, Exactly

Closing costs are all the fees and taxes you pay to complete a real estate transaction. They cover everything from government transfer taxes to lender charges to attorney fees. They are separate from your down payment and are typically paid at the closing table, that final meeting where you sign all the paperwork and get the keys.

New York is unique in a few ways that make closing costs higher here than in many other states. Attorneys are required for real estate transactions, as it is an attorney closing state. The state transfer tax adds 0.4 percent to the transaction. Mortgage recording taxes also apply in many cases.

The Big Line Items What You Are Actually Paying For

Lender Fees cover the cost of processing your loan and include origination fees, underwriting fees, processing fees, and credit report charges. Shopping your lender is one of the best ways to save here, as fees vary more than you might think.

Attorney Fees are required in New York, and you will need a lawyer to handle the closing. Expect $800 to $1,500 for a standard residential transaction in Erie County.

Title Insurance and Search protects you and your lender against any claims on the property's title. You will pay for a title search, title exam, and lender's title insurance policy.

Appraisal and Inspection confirm the home's value for your lender. A home inspection, which is optional but highly recommended, checks the condition of the property. Expect $300 to $500 for a home inspection in the Buffalo area. Additional inspections for roof, HVAC, foundation, or pests may also be needed.

Prepaid Costs are expenses you are paying in advance, such as homeowners insurance, which typically costs $800 to $1,500 per year in Western New York , and prepaid property taxes. Your lender will collect these upfront and hold them in an escrow account.

Recording Fees are charged by the county to officially record your deed and mortgage. In Erie County, these are part of your closing costs.

Property Taxes in Erie County range from $3,000 to $6,000 per year depending on the municipality. While not a closing cost per se, your lender will roll this into your monthly escrow payment.

Who Pays What in New York

The breakdown varies, but here is a general guide for Western New York. The New York State Transfer Tax of 0.4 percent is usually paid by the seller. Attorney fees are paid by both buyer and seller, each paying their own. Lender fees, title insurance, home inspection, appraisal, recording fees, and prepaid taxes and insurance are typically paid by the buyer. Broker commissions of 5 to 6 percent are paid by the seller.

What This Looks Like on a Real Home

Let us run the numbers on a $250,000 home in Erie County with 5 percent down, which equals $12,500. The estimated closing costs would be approximately $8,000 to $12,000, which is 3 to 5 percent of the purchase price. The total cash needed at closing would be roughly $20,500 to $24,500, which is the down payment plus closing costs. That is the number you really need to budget for, not just the down payment.

A Note on Down Payment Myths

You do not need 20 percent down. That is one of the biggest myths in real estate. Here is what is actually available to buyers in Buffalo right now. FHA loans require 3.5 percent down with a minimum 580 credit score. Conventional loans require 3 to 5 percent down for first time buyers. USDA and VA loans offer 0 percent down if you qualify. SONYMA, the New York State program, offers down payment assistance for first time buyers in Buffalo and Erie County.

Assistance Programs in Western New York

If you are worried about covering closing costs, there are programs that can help. SONYMA offers down payment assistance for first time buyers in Buffalo and Erie County. The FHLBNY Homebuyer Dream Program provides grants up to $30,000 for down payment and closing cost assistance for eligible first time buyers. The Open Your Door Mortgage Program offers up to $10,000 in credit that can be used for closing costs, insurance, escrow deposits, or taxes.

Seller Concessions

Seller concessions are another tool that can reduce your upfront costs. This is when a seller agrees to cover certain buyer costs, like closing costs, prepaid taxes, or loan fees, to help reduce how much cash the buyer needs upfront. Loan programs limit how much can be credited, with conventional loans allowing 3 to 6 percent, FHA loans allowing up to 6 percent, and VA loans allowing up to 4 percent.

FAQ

Q: What percentage of the home price are closing costs in New York?

A: Buyers in New York typically pay 2 to 5 percent of the purchase price in closing costs . On a $200,000 home, that is $4,000 to $10,000.

Q: Are closing costs included in my down payment?

A: No. Closing costs are separate from your down payment. You will need cash for both at closing.

Q: Do I need an attorney for closing in New York?

A: Yes. New York is an attorney closing state, so a licensed attorney must handle the deed preparation and closing. Budget $800 to $1,500 for attorney fees.

Q: Who pays the New York State transfer tax?

A: The seller typically pays the 0.4 percent New York State transfer tax. Erie County does not add an additional county level transfer tax.

Q: How much is a home inspection in Buffalo?

A: A home inspection in the Buffalo area typically costs $300 to $500.

Q: Can I roll closing costs into my mortgage?

A: In some cases, yes. You may be able to finance closing costs by accepting a slightly higher interest rate, through lender credits, or through certain loan programs. Talk to your lender about your options.

Q: Are there programs to help with closing costs in Buffalo?

A: Yes. SONYMA offers down payment assistance for first time buyers. The FHLBNY Homebuyer Dream Program provides grants up to $30,000 . The Open Your Door program offers up to $10,000 in closing cost credit.

Q: What is the difference between prepaids and closing costs?

A: Prepaids are expenses you are paying in advance, like homeowners insurance and property taxes, that will be held in escrow. Closing costs are the actual fees for services like attorney, title, and lender. Both are paid at closing.

Q: How can I reduce my closing costs?

A: Shop your lender, as fees vary more than you might think. Ask about lender credits in exchange for a higher rate. Look into assistance programs like SONYMA or FHLBNY grants. Negotiate seller concessions, where the seller agrees to cover some of your closing costs.

Q: What is the number one mistake buyers make with closing costs?

A: Not budgeting for them. Many first time buyers save for a down payment but forget about closing costs entirely. Make sure you are saving for both before you start your home search.