Buying a home in Kentucky requires consideration of more than just the price: settlement costs. Settlement costs are the final expenses you’ll need to pay to complete a real estate transaction, including taxes, lending fees, and title insurance.
In this Redfin article, we explain what closing costs are in Kentucky, who typically pays them, and how much you can expect to pay as a buyer or seller. From lender fees to insurance, we’ll break down what you need to know to budget wisely and make the home buying process as smooth as possible.
What are the average closing costs in Kentucky?
In addition to a down payment, homebuyers will also need to pay closing costs before they can get the keys to their new home. Closing costs in Kentucky range from 2% to 5% of the home’s purchase price. However, it’s important to remember that this is just a range, and the total amount will depend on a variety of factors, including the purchase price of the home, the type of loan you have, and any adjustments you negotiate with the seller.
For example, if you’re buying a home in Lexington, where the average sales price is $329,475, your closing costs will range from $6,590 to $16,474. Or, if you’re buying a home in Louisville, where the average sales price is $267,000, your closing costs for a home here will range from $5,340 to $13,350.
Who pays settlement costs in Kentucky?
So who pays closing costs in Kentucky? In most transactions, both the buyer and seller pay closing costs. However, the amount of closing costs for each party varies depending on how much they have to pay. Keep in mind that it is common for buyers to pay their own closing costs and for sellers’ closing costs to be deducted from their home sale proceeds.
Kentucky Buyer Settlement Costs
Kentucky home buyers will pay between 2% and 5% of the purchase price. If you pay a deposit, this amount is deducted from your closing costs and reduces the total amount due at closing. A deposit is typically between 1% and 3% of the home price. Let’s look at some common closing costs that buyers incur:
- Appraisal fee: A home appraisal typically ranges from $300 to $500 and is paid separately when you obtain the service, but if not, it must be paid at closing.
- Inspection fee: A home inspection typically costs between $300 and $500, but can vary based on local rates and the specific features of the property. If you don’t pay for the inspection at the time of the inspection service, you’ll have to pay at closing.
- Loan Fee: Lenders may charge a fee for originating the loan, and it’s important to inquire what this fee includes and whether it’s negotiable to avoid high fees.
- Loan Fee: Lenders may also charge a loan processing fee to cover underwriting and related services. As with origination fees, check with your lender about its purpose and whether it can be waived.
- Loan Discount Points: If you buy points to lower your interest rate, you usually pay a one-time fee at closing. Each point lowers your interest rate by 0.25% to 0.5%. Before buying points, consider your long-term plans, including how long you plan to own the home and when you plan to refinance.
- Private Mortgage Insurance (PMI): If you put down less than 20% you’ll typically have to pay PMI, and some loans let you pay PMI up front at closing, giving you the choice between higher upfront costs or higher monthly payments.
- Title Insurance: Title insurance is a one-time expense incurred at closing, and the buyer typically pays both the lender’s and owner’s premiums.
- Homeowners Insurance: In Kentucky, your annual homeowners insurance premium may be part of your settlement costs.
- Homeowners Association Dues: If you live in a community managed by an HOA, you may be required to pay one month’s dues at closing. This amount varies by property and covers maintenance and operating costs.
- Property Tax: In Kentucky, you may be required to prepay a portion of your property taxes at closing as part of your closing costs.
Kentucky Seller Closing Costs
Closing costs paid by sellers in Kentucky vary, but common closing costs paid by sellers include:
- Real estate agent fees: These fees can be a significant cost to sellers. 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 be required to pay various fees. These may include HOA transfer fees, outstanding dues, and fees for obtaining any HOA documents required by the buyer. The exact fees will vary depending on the HOA’s rules and regulations.
- Property Tax: The seller is responsible for paying any property taxes accrued but not yet paid through the settlement date. These unpaid property taxes are usually prorated according to the number of months the seller owned the property.
- Title Insurance: Typically, the seller will pay for the buyer’s title insurance. This insurance protects the buyer against any issues with the title that may arise after the property is sold. The cost of title insurance can vary, but is usually based on the sale price of the home.
- Transfer Tax: When you sell a home in Kentucky, you’ll be paying state-imposed real estate transfer taxes. These taxes are typically calculated based on the sale price or assessed value of the property. Specific tax rates and regulations can vary widely, so it’s important to know your local requirements and consider these potential costs when selling your home.
July 2024 median home sales price data from Redfin Data Center.