Closing Costs in PA: How Home Buyers Can Prepare
Updated: Jun 7
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Pennsylvania is not only one of the United States' largest states, but also one of the most diverse. Sprawling cities and beautiful farmland are just two of the qualities that make The Keystone State so unique. From Philadelphia to Pittsburgh, and everywhere in between, this state has something for nearly anybody.
Of course, housing across the state is in demand. Saving up a down payment can be tricky, but for first-time homebuyers in particular, it is also important to budget for and save enough money to cover closing costs as well.
Pennsylvania closing costs
The average closing costs in PA are about $10,000, including property taxes due. Carving out the taxes, you can expect to pay in the neighborhood of $4,000-$5,000, though this varies largely by area and home size.
In Pennsylvania, a good rule of thumb is to expect to pay about 3-5% of the home's price in closing costs as a buyer. With an average Pennsylvania home price of $240,658, as of August 2021, this puts expected closing costs between $7,220 and $12,033.
Those buying in Philadelphia and its' affluent suburbs can expect to pay more, due to the higher real estate prices and property/municipal tax rates in the area. Of course, there are many other variables that will impact what you can expect to pay at closing, including:
The real estate taxes in the county/town where you live
The date in the month that you close
Whether your new home is part of a homeowner's association
Related: A first-time home buyer guide
1. Property taxes in Pennsylvania
Unfortunately, PA has some of the highest property taxes in the entire country. The five highest taxes counties on a percentage basis are:
Monroe County - 2.46%
Delaware County - 2.12%
Berks County - 2.09%
Allegheny County - 2.01%
Northampton County - 1.99%
Meanwhile, the lowest taxed counties are:
Sullivan - 0.91%
Bedford - 0.92%
Philadelphia - 0.99%
Huntingdon - 1.05%
Montour - 1.06%
Here's what this difference means. A $400,000 home will carry a $9,840 annual tax bill in Monroe County, but only a $3,640 burden in Sullivan County. Given that you'll need to pay for a number of months of your taxes upon closing, you can see how the location of your home can play a large role in determining your closing expenses.
2. The physical date in a month
The month in which you close on your home will be the only time that you'll ever be asked to prepay mortgage interest. Given that the early months and years of your mortgage will carry the highest interest payments, closing early in a month could leave you prepaying interest for an entire month.
Closing late in the month, on the other hand, could leave you only paying interest for a day or two.
3. Homeowner's associations
Another variable to take into account is whether your new home or property is part of a homeowner's association (HOA). These fees won't impact you as much as your property taxes, for example, but HOA transfer and registration fees could set you back a few hundred dollars.
More: Learn about closing costs in neighboring Maryland
PA closing costs for buyers
When you purchase a home in Pennsylvania, your closing costs will include a laundry list of fees and expenses. They fit into a few main categories:
Your down payment
Funding an escrow account
Bank (lender) fees
Legal/Title fees
Miscellaneous other fees
1. Your down payment
The largest part of your expenses will be your down payment. This is the amount of money that you've decided to "put down." It may be as little as 3.5% of the home's purchase price, if you're using an FHA loan, or 20% or more of the price of the home.
If you decide to "put" 10% down on a $300,000 home, your down payment will be $30,000. And while this is not a closing cost, per se, it is an expense that is generally paid by you at the time of close.
Remember - you will be responsible for paying private mortgage insurance (PMI) if you put less than 20% down, which will add to your monthly mortgage payments until you've reached 20-22% equity.
2. Escrowed expenses
At close, you'll establish an escrow account. This account will be funded to pay expenses like homeowner's insurance, property taxes, and other applicable expenses. As far as the expense to you, you'll likely be asked for the following:
A paid receipt for the first full year of homeowner's insurance
At least three months of real estate/property taxes held in reserve
Then, on an ongoing basis, part of your monthly mortgage payment will be held in escrow to pay these bills on your behalf as they come up. Escrow accounts tend to be really convenient for homeowners, since they make it so that you are not responsible for paying your insurer or your local government for property taxes.
3. Lender and loan-related fees
Upon closing in Pennsylvania, you'll present a check or wire funds to your title company. The title company will then take their money and divvy up what remains to your lender, the seller, and all other involved parties.
Your lender will most likely receive funds for the following services:
Application/Underwriting fees - Unfortunately, requesting a mortgage isn't free. Most lenders will charge a mortgage application fee, which usually costs a few hundred dollars or so.
Document preparation - To get ready for closing, your lender (and attorney) have lots of documents and attestations that they need to prepare for your review and signature. This will come at a cost.
Loan origination fee - Usually between 0.5%-1% of the loan amount, your lender also reserves the right to charge you for processing and disbursing your loan. If you borrow $300,000, you can expect to pay somewhere between $1,500-$3,000, for example.
Credit reporting fee - Lenders usually pass on credit check fees to the borrower, but they should be less than $100 in totality.
Discount points (if applicable) - Your lender likely gave you the option to buy points on your mortgage in an effort to lower your interest rate. If you did take advantage of the offer, you'll see these charges included in your closing costs.
Prepaid interest - Closings are unique in that they are the only time you will ever prepay mortgage interest. Included in your final costs will be the daily interest charges for the remainder of the month in which you are closing. If you close on the 23rd of a 30 day month, for example, you'll pay about a week's worth of interest.
4. Legal and title fees
Like we said, your lender isn't the only one getting paid on closing day. Your attorney and/or title company will also get their cut of your check. They'll be compensated for completing the following services:
Attorney fees, including the title search - May cost around $1,000 or more, depending on the hours worked and complexity of your purchased home
Title insurance - 0.5%-1% of the home's sale price - this technically is not a legal fee, but we'll lump it in here since it has to do with the title on your home.
Deed recording fee - Your attorney or title company likely will take care of this for you. Fees are generally under $50.
5. Miscellaneous other fees
You'll also likely have a variety of other expenses pop up before or at your closing, including inspections for the home, radon, and well (if applicable), as well as things like notary fees, flood certifications, and home appraisals.
Pennsylvania has the second highest average closing costs in the United States, behind only Delaware. So as you go through the homebuying process, it is important to assure you'll have enough cash on hand to cover these expenses, as well as miscellaneous other expenses that may not be listed here.
One other thing to consider is that Pennsylvania is one of 29 states nationwide where an attorney is not required to oversee the closing, a law that could potentially save you a bit of money in attorney's fees.
PA closing costs for sellers
Though not commonly thought about, home sellers in Pennsylvania are also subject to some closing costs of their own. Generally, sellers can expect to pay fees such as settlement fees, attorney fees, mortgage payoffs, and HOA fees, if applicable.
Beyond this, it is also possible to encounter other miscellaneous fees or taxes based on where you reside within Pennsylvania.
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