How Much Are Closing Costs in Tennessee 2024?

It’s no secret that buying a home is one of the largest financial decisions one will make, and there’s a lot more to consider than just the home’s price. Another important cost to consider when you’re buying a home is the amount you’ll pay for closing costs.

Closing costs are the final expenses that need to be paid in order to close on a real estate transaction, such as taxes, lender fees, and title insurance. If you’re feeling unprepared or overwhelmed, don’t worry. To help you budget for closing costs, this Redfin article will cover how much closing costs are in Tennessee, who pays for them, and which costs you can expect to pay as a buyer and as a seller.

How much are closing costs in Tennessee?

Before securing the keys to your new home, homebuyers will need to pay for closing costs. As a general rule of thumb, you can expect closing costs in Tennessee to add up between 2%-5% of the purchase price. However, keep in mind that closing cost amounts vary depending on many factors – such as the buyer’s loan program or negotiations made with the seller.

For example, if you’re buying a home in Memphis, which has a median sale price of $190,000, closing costs could range anywhere from $3,800 to $9,500. Or, let’s say that you’re buying a home in Nashville, which has a median sale price of $479,945 . Closing costs for a home here could be between $9,599 and $23,997 .

Who pays closing costs in Tennessee?

In most areas, including Tennessee, both the buyer and the seller will pay closing costs. But, each party’s closing costs amount will vary depending on what they are required to pay. Keep in mind that it’s common for the buyer to pay closing costs out of pocket, while the seller’s closing costs are deducted from the home sale proceeds.

Buyer closing costs in Tennessee

Closing costs in Tennessee for buyers typically range between 2%-5%. If you paid earnest money, this amount will be subtracted from your closing costs, which will reduce the total amount you owe at closing. Earnest money is typically between 1%-3% of the home’s price. Let’s break down some of the common closing costs covered by the buyer:

• Appraisal fee: Home appraisals, which typically range from $300 to $500, are usually paid for separately at the time of the service. However, if not, you’ll need to pay for this at closing.
• Inspection fee: Although not required, a home inspection is highly recommended in T.ennessee. Home inspections generally range from $300 to $500 in cost and are usually paid at the time of service. However, if not, it will need to be paid at closing.
• Loan origination fee: Your lender may charge a fee for creating your loan. It’s important to inquire about what this cost covers and whether it’s negotiable to potentially avoid high costs.
• Loan processing fee: In addition to the origination fee, your lender may also charge a fee for processing your loan. This typically covers underwriting and related services. It’s recommended to discuss this fee with your lender to understand what this fee covers and if it can be waived.
• Loan discount points: If you buy discount points to lower your interest rate, you’ll pay a one-time fee at closing. These points can lower your rate by 0.25% to 0.5%, but consider your long-term homeownership plans before paying for a reduced rate.
• Private mortgage insurance (PMI): Required for down payments under 20%, PMI might involve an upfront fee at closing, depending on the loan type. It’s usually part of your monthly payment, but some loans offer the option to pay it as a one-time fee.
• Title insurance: Title insurance is a one-time fee paid as part of closing costs. Buyers typically cover both lender and owner title insurance policies.
• Homeowners insurance: In Tennessee, your annual homeowner’s insurance premium may be part of your closing costs.
  Homeowners Association dues: For homes in HOA-managed communities, you might have to pay one month’s dues at closing, which can vary depending on the property and covers maintenance and operational expenses.
• Property taxes: Buyers may have to prepay property taxes as part of their closing costs in Tennessee.

Seller closing costs in Tennessee

How much closing costs are in Tennessee for sellers will vary between each transaction, but here are some of the common fees and costs covered by sellers:

• Real estate agent commission fees: These fees can be a significant cost for sellers. Commission 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 need to pay a variety of fees. These can include HOA transfer fees, outstanding dues, and possibly a fee for obtaining HOA documents required by the buyer. The exact fees will depend on the HOA’s rules and regulations.
• Property taxes: Sellers are responsible for any property taxes that have accrued but not yet been paid up to the closing date. These unpaid property taxes are typically prorated for the months that you owned the property.
• Title insurance: Sellers typically cover the cost of the buyer’s owner’s title insurance policy. This policy protects the buyer from any potential title issues that may arise after the property is sold. The cost of title insurance can vary but is generally based on the property’s sale price.
• Transfer taxes: Depending on the location and local regulations, sellers in Tennessee may be responsible for paying state transfer taxes as well as potential local transfer taxes. Transfer taxes are typically based on the property’s sale price and are collected when ownership of the property is transferred from the seller to the buyer.

Median home sale price data from the Redfin Data Center during July 2024.

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