Ever wonder how much cash you need at closing beyond your down payment? You are not alone. Closing costs can feel confusing, especially when you are trying to write a strong offer in Lexington. In this guide, you will learn what buyers typically pay, how to estimate your total before you make an offer, and what is standard in Fayette County. Let’s dive in.
Closing costs: the basics
Closing costs are the fees, prepayments, and escrow deposits you pay at closing in addition to your down payment. They cover lender charges, title and settlement services, insurance and taxes, recording fees, and due diligence items.
For planning, budget about 2% to 5% of the purchase price for closing costs. Your exact number depends on your loan program, price point, whether you set up an escrow account, and local title and recording fees. The best way to confirm your total is to request a Loan Estimate from your lender and review the Closing Disclosure before settlement.
Who usually pays what
- Buyer typically pays: lender and appraisal fees, buyer-side title and lender’s title insurance, mortgage recording fees, prepaid homeowner’s insurance and taxes, escrow deposits, and buyer inspections or surveys.
- Seller typically pays: brokerage commissions, seller title items where customary, payoff of their mortgage, and prorated property taxes through the closing date.
- Many items are negotiable. Seller credits toward buyer closing costs are common and can reduce your cash to close.
How much to budget in Lexington
Plan for 2% to 5% of the purchase price for buyer closing costs. The range shifts with your loan type and price point. Government-backed loans can include upfront fees that may be financed, while conventional loans may include private mortgage insurance depending on your down payment.
Under federal rules, your lender must provide a Loan Estimate within three business days after you apply and a Closing Disclosure at least three business days before you close. Use these documents to verify your final numbers.
Buyer cost categories
Loan-related fees
- Origination, processing, and underwriting: Charged by your lender to evaluate and set up your loan. These may be a flat fee or a percentage of the loan amount.
- Rate lock and discount points: You may pay to lock your rate or to buy down the rate. Each discount point equals 1% of the loan amount.
- Appraisal: Usually paid up front to confirm value. Typical range is several hundred dollars, often about $400 to $800 or more depending on the property.
- Credit report and flood determination: Small third-party fees.
- Mortgage insurance and upfront program fees:
- Private Mortgage Insurance (PMI) for conventional loans with less than 20% down.
- FHA loans often include an upfront mortgage insurance premium that can be financed. Confirm current rates with your lender.
- VA loans often include a funding fee that can be financed. The amount varies by borrower type and down payment.
Title and settlement
- Title search and exam: The title company reviews public records to confirm clear ownership.
- Lender’s title insurance: Protects the lender and is usually required when you have a mortgage.
- Owner’s title insurance: Optional for buyers but commonly recommended to protect your ownership interest. Who pays can vary by local custom and negotiation.
- Settlement or closing fee: Charged by the title company or closing attorney to conduct your closing.
- Notary fees: Small fees for document notarization.
Government and recording
- Recording fees: Paid to the Fayette County Clerk to record your deed and mortgage. Amounts are usually modest and depend on document type and page counts.
- Transfer-related charges: Kentucky does not impose a broad statewide transfer tax like some states, but recording and county fees apply. Always confirm current charges with your title or closing agent.
- Prorations: You will reimburse the seller for prepaid items, such as taxes or HOA dues, for the period after closing.
Prepaids and escrow deposits
- Homeowner’s insurance: Most lenders require proof of a paid first-year premium at closing.
- Property taxes: You may prepay a portion and fund an escrow account if required by your lender.
- Prepaid interest: Covers interest from the funding date to the end of the month.
- Escrow reserves: Lenders often collect 2 to 12 months of taxes and insurance to seed your escrow account.
Inspections, surveys, and other costs
- Home, pest, radon, septic, mold, or lead inspections: Often $100 to $1,000 depending on the scope.
- Survey: Sometimes required and typically several hundred dollars.
- HOA transfer or application fees: If the home is in an association, expect modest transfer or document fees.
- Administrative items: Courier and wire fees are usually small.
Lexington and Fayette County specifics
- Who conducts closings: In Kentucky, closings are often handled by title companies and settlement agents. An attorney may be involved based on party preference. Ask your title company who will conduct your closing.
- Recording office: The Fayette County Clerk records deeds and mortgages. Your title company will confirm exact recording fees for your property.
- Transfer taxes: Kentucky does not have a broadly applied statewide real estate transfer tax similar to some states, but recording and county fees apply. Confirm current charges with your title company.
- Property tax proration: Fayette County property taxes are prorated at closing. You will typically reimburse the seller for the period after your closing date.
- HOA considerations: Many single-family homes are not in HOAs, but townhomes and newer subdivisions often are. Expect possible transfer or resale disclosure fees if there is an HOA.
- Flood and insurance: Lender-required flood insurance depends on the property’s flood zone. Your lender and insurer can confirm whether coverage is needed.
- Owner’s title policy custom: Who pays for the owner’s policy can vary and is negotiable. Ask your agent what is typical for your area and price point.
Estimate your closing costs before you offer
Follow these steps to get a reliable number before you write an offer:
- Get prequalified and request a Loan Estimate for your chosen loan program.
- Ask your agent or a local title company for a sample fee worksheet for Fayette County.
- Add buyer-paid items that are not on the Loan Estimate, such as inspections, surveys, or HOA transfer fees.
- Add a small cushion, about $500 to $1,000, for incidentals like courier or wire fees.
DIY worksheet
Use this quick worksheet to build your estimate:
- Purchase price (P)
- Down payment
- Loan amount (L) = P minus down payment
- Lender fees: use the Loan Estimate or estimate 0.5% to 1.5% of L if you do not have one
- Appraisal, credit, flood determination: add itemized estimates
- Title and settlement charges: request a local title quote, or use a placeholder such as $500 to $2,000
- Prepaids: first-year homeowner’s insurance premium, prepaid interest, and escrow reserves
- Property tax escrow: lenders often collect 2 to 12 months of reserves
- Recording fees: ask the title company for Fayette County figures, or use a placeholder such as $50 to $300
- Inspections, surveys, HOA fees: add expected costs
- Subtotal, then subtract any negotiated seller credits
Worked example: a $300,000 Lexington home
Here is an illustrative example to show how the pieces add up. Adjust your numbers based on your Loan Estimate and title quote.
- Price: $300,000
- Down payment: 10% equals $30,000
- Loan amount: $270,000
- If closing costs equal about 3% of price, total costs are about $9,000
- Possible breakdown of that $9,000:
- Lender fees, appraisal, credit report: $2,000 to $4,000
- Title, settlement, and recording: $1,200 to $2,000
- Prepaids and escrow funding: $2,500 to $3,500
- Inspections, HOA, and misc: $300 to $1,000
- Cash to close: $30,000 down payment plus about $9,000 closing costs equals $39,000 before any seller credits
Ways to lower your cash to close
- Negotiate seller concessions to cover some buyer closing costs. Limits can apply by loan type.
- Ask about lender credits in exchange for a slightly higher interest rate.
- Shop lenders for lower origination and discount fees, and compare Loan Estimates.
- If your program allows, finance certain upfront fees, such as the FHA upfront mortgage insurance premium.
- Consider the owner’s title policy carefully. It is optional for buyers, but many still purchase it for protection.
What to ask your lender, title company, and agent
- From your lender:
- Can you issue a current Loan Estimate for my loan program and rate lock?
- Which fees are negotiable or refundable?
- How many months of taxes and insurance will you collect for escrow?
- If I use FHA, VA, or USDA, what upfront fees apply and can they be financed?
- From the title or closing agent:
- Can you provide a sample Closing Disclosure with typical Fayette County title and recording fees?
- What are the exact recording charges for my deed and mortgage?
- What are the premiums for lender’s and owner’s title insurance, and who typically pays the owner’s policy here?
- From your agent and the seller side:
- Will the seller cover any closing costs or the owner’s title policy based on local custom?
- If there is an HOA, what are the exact transfer or resale fees?
Red flags to watch before closing
- Fees that appear twice or “junk fees” without a clear description.
- Receiving your Closing Disclosure less than three business days before closing without a valid waiver.
- Title exceptions such as liens or judgments that are not resolved.
- Big differences between the Loan Estimate and Closing Disclosure without a clear explanation.
- Missing or incorrect prorations for property taxes or HOA dues.
Ready to run the numbers?
You deserve a clear, calm path to the closing table. If you want help building your custom estimate or negotiating smart seller credits, reach out for local, hands-on guidance. Work with Natalie Cusic for boutique advice, strong negotiation, and a smooth Lexington closing.
FAQs
What are typical buyer closing costs in Lexington, KY?
- Most buyers budget about 2% to 5% of the purchase price for closing costs, with the exact number set by your loan, price point, title fees, and escrows.
Who usually pays for the owner’s title insurance policy?
- It varies by local custom and negotiation in Kentucky. Your agent and title company can confirm what is typical for your specific property.
Do Kentucky buyers pay a transfer tax in Fayette County?
- Kentucky does not have a broadly applied statewide real estate transfer tax like some states, but recording and county fees apply. Confirm current charges with your title company.
How are property taxes handled at closing in Lexington?
- Taxes are prorated, so you typically reimburse the seller for the portion of the year after your closing date. The title company will show this on your settlement statement.
When will I know my final closing costs?
- Your lender must provide a Loan Estimate within three business days of application and a Closing Disclosure at least three business days before closing for confirmation.
Can the seller pay some of my closing costs?
- Yes, seller credits toward buyer closing costs are common and can reduce your cash to close. Your agent will advise on what is typical and allowed for your loan type.
