Alabama Closing Cost Calculator: Know Exactly What You'll Pay
Updated: Oct 25
Home buyers across the country closely watch their expenses, and for good reason. Buying a home is expensive!
Beyond the purchase price of your home, you'll need to pay for other incidentals, like a home appraisal, homeowner's insurance policies, and a whole host of closing costs/expenses.
It doesn't help that home prices and rates have marched higher in unison over the past few years. Even traditionally cheaper states, like Alabama, have not been immune to this unaffordability problem.
Today, though, we're back to help make this process easier. Here is our Alabama closing cost calculator.
Alabama closing cost calculator
Wondering what you'll need to budget for closing costs on your new home in Alabama? Give us a few estimates, and our calculator will work its magic for you!
Just enter your email below, and we'll send it right over to you.
Then, once you have it, just estimate each category's expense and let the calculator take care of the rest.
What closing costs does the calculator account for?
Alabama buyers using this calculator should know that the following closing related expenses are considered:
Loan origination fee
Credit reporting fee
Flood certification fee
You can use the miscellaneous category to sum up incidentals like courier and credit reporting fees. If you're looking for some help in estimating what some of these closing related expenses may cost, here are our best estimates.
Use these estimates to help you get started with the calculator.
1. Property taxes
Thankfully, Alabama buyers can buy homes in a state with some of the lowest property tax rates in the entire country.
In fact, SmartAsset estimates that the average home statewide carries annual property taxes of just $674, far less than the national average of $2,800.
The average Alabama real estate tax rate is 0.41%.
For your reference, we've included a list of Alabama counties and their average property tax rates. This way, you can begin to get an idea as to whether your tax bill is likely to be higher or lower than our calculator estimates.
All Alabama counties have average effective property tax rates between 0.26% (Clay County) and 0.66% (Jefferson County).
2. Annual homeowner's insurance premium
Typically, when you close, you'll need to prepay the entire first year of homeowner's insurance. This expense will be included as a closing cost item. The price of your policy and premiums will depend on the size of your home and presence of "risky" features like swimming pools or trampolines.
Be aware: Alabama insurance policies tend to be pricier than in many other states in the country. The risk of hurricanes and tornadoes plays a role here.
Forbes reported that, as of October 2023, the average costs per year for coverage in Alabama are:
$1,406 for $200,000 in dwelling coverage
$1,996 for $350,000 in dwelling coverage
$2,654 for $500,000 in dwelling coverage
3. Loan origination fee
This AL closing cost calculator will ask you to estimate your loan origination fee, which usually costs between 0.5% and 1% of the total loan amount. So, if you borrow $350,000 to buy your home, you're looking at a loan origination fee between $1,750 and $3,500.
4. Home appraisal
Your lender will most likely mandate that you get a home appraisal, in part to ensure that you don't borrow more money than your home is worth.
Most often, you'll pay for your appraisal at the time of your closing. In Alabama, you can expect your appraisal to cost you between $250 and $400 for an average sized home.
5. Survey fees
You'll likely need a surveyor to come visit your new property and accurately draw and document property lines, particularly if you have neighbors. Expect your surveying to cost $200 or so, depending on the lot and size of your property.
6. Credit reporting fee
Your lender will conduct a thorough credit review before agreeing to close on your home loan. Credit fees are not usually pricy, but they are something that is payable upon closing.
Alabamans should question lenders if their estimated costs are above $50-$75.
7. Flood certification
Most home buyers need to have a flood certification completed before taking ownership of a home. This certificate normally costs up to $30 or so.
In Alabama, flood zones may include areas in flood basins near rivers, lakes, or the Gulf of Mexico. If you're found to be living in a flood zone, you'll need to add flood insurance to your homeowner's insurance policy.
8. Title search and insurance
Title search fees should be relatively consistent no matter whether you use a title company, real estate attorney, or another qualified professional. Your title insurance, on the other hand, may be mandated by your lender and can alter your closing costs greatly.
Title insurance policies typically average $1,000 (and is payable just once), but this figure can vary greatly depending on:
The size of your home
State and county of residence
Age of house
In Alabama, it is mandatory to purchase a lender policy to protect the bank, though buying an owner policy is optional. In many cases, this is a one-time fee that is worth it.
9. Taxes and recording fees
In most states in the country, sellers pay what is known as a transfer tax. In Alabama, this responsibility falls on the buyer and is $1 for every $1,000 in your new home's sales price.
Depending on your town or county, local fees or additional taxes may apply.
Related: Prepare for Louisiana closing costs
Every line item in the calculator allows you to change the dollar amounts that default to each line. All of these lines are factors that will help determine exactly what you'll pay upon closing.
You have full control over the calculator. We do make a couple of assumptions to help you out, though. For instance, the calculator assumes that:
You'll close on the last day of a month: If your closing is held before the last day of the month, you'll need to prepay mortgage interest for the remainder of the month. For instance, closing on the 16th of a 30-day month means that you'll also be on the hook for 14 days of mortgage interest. Our calculator does not account for this at this time, though it is unlikely to be a deal killer in terms of your calculated closing costs.
Title insurance: We've left a line item for you to account for your title insurance. Fill in the box with the price of your policy or a "0" if you're not buying insurance.
Prepaid real estate tax: Our calculator assumes that you'll need to prepay three months of property taxes at the time of your closing. In reality, you may be on the hook for more or less months, depending on when in the year you buy your home.
Buying a home in Alabama
Are you looking to buy a home in Alabama? As of October 2023, the average home in Alabama is valued at $223,447, a considerable increase from $162,000 in January 2020, but still far below the national average of nearly $350,000.
How much are closing costs in AL?
Closing costs for Alabama buyers average between 1-2% of the home's purchase price. This means you can expect to pay around $2,500-$5,000 for a $250,000 home.
Ultimately, many variables will impact your exact expenses, like we've discussed, including your real estate tax and funding your escrow account.
Our closing cost calculator will help prevent you from any financial surprises when you buy your home in Alabama. Do any of these closing estimates or figures surprise you?
Tell me about it in the comments below!
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