How Much Are Closing Costs in Connecticut?

When buying or selling a home in Connecticut, individuals encounter financial obligations beyond the purchase price or down payment. These additional expenses, known as closing costs, are fees and charges settled to finalize a real estate transaction. Understanding these costs is important for preparing for a property transfer, as they represent a significant financial outlay at closing. This article provides an overview of typical closing costs in Connecticut.

What Are Closing Costs

Closing costs encompass fees and expenses incurred by both buyers and sellers during a real estate transaction. These cover services necessary to legally transfer property ownership and are paid on the closing date. While some costs are negotiable, there is a general division of responsibility for these expenses in Connecticut.

Buyers bear most costs related to securing a mortgage, such as loan processing and appraisal fees. Sellers cover expenses associated with facilitating ownership transfer, often including real estate commissions and transfer taxes. Understanding these distinctions is important, as cost allocation impacts the financial burden for each side.

Specific Closing Cost Categories

Lender-Related Fees

When financing a home purchase, buyers encounter several fees charged by lenders for processing and securing the mortgage. The loan origination fee, ranging from 0.5% to 1% of the total loan amount, covers administrative costs for processing the loan application and documents.

Lenders require appraisal fees, typically $300 to $600 in Connecticut, for a professional assessment of the property’s value. A credit report fee, around $35 to $250, obtains the borrower’s credit history. Underwriting fees, between $300 and $900, cover reviewing and approving the mortgage application. Some transactions may also include a flood certification fee, which costs around $12.

Title and Escrow Fees

Title and escrow services ensure clear legal ownership and proper handling of funds. A title search, costing $100 to $450, confirms legal ownership and identifies any liens. Title insurance protects against future claims or defects in the property’s title.

Lenders require a lender’s title insurance policy, usually paid by the buyer, to protect their investment. An owner’s title insurance policy, protecting the buyer’s investment, costs 0.5% to 1% of the home’s purchase price. Escrow service fees, covering secure handling of funds and documents, range from $350 to $1,000 or 1% to 2% of the sale price.

State and Local Taxes and Fees

Connecticut imposes specific taxes and fees on real estate transactions. The Connecticut Real Estate Conveyance Tax, paid by the seller, has both a state and municipal component. The state portion is tiered based on sale price: 0.75% on the first $800,000, 1.25% on amounts between $800,000 and $2,500,000, and 2.25% on amounts exceeding $2,500,000.

Municipal conveyance tax rates are 0.25% of the sale price, though some municipalities charge up to 0.5%. Recording fees are charged by the town clerk to register the deed and mortgage. These fees are $70 for the first page of a document and $5 for each additional page. For MERS (Mortgage Electronic Registration Systems) documents, a flat fee of $160 may apply, or $160 for the first page plus $5 for additional pages.

Attorney Fees

In Connecticut, state law requires a real estate attorney to oversee the closing process. Attorney fees cover legal representation for the buyer or seller, preparation of legal documents, and coordination of the closing. Fees for a real estate closing in Connecticut range from $750 to $3,000 or more, depending on transaction complexity. The attorney ensures all legal requirements are met and client interests are protected.

Prepaid Expenses and Prorations

Certain expenses are prepaid or prorated at closing to account for ongoing homeownership costs. Buyers prepay the initial homeowner’s insurance premium for the first year at closing, ensuring the property is insured from ownership transfer.

Property taxes are prorated, with the buyer reimbursing the seller for taxes already paid for a period beyond the closing date. Buyers may also establish an escrow account with their lender, depositing funds for future property tax and homeowner’s insurance payments. This ensures recurring obligations are met.

Factors Affecting Closing Costs

Total closing costs vary among real estate transactions in Connecticut. A primary factor is the home’s purchase price, as many fees like conveyance taxes and title insurance premiums are calculated as a percentage of the sale price. A higher purchase price results in greater associated closing expenses.

The type and amount of the loan also play a role, as lender-related fees like loan origination and appraisal costs are tied to the mortgage. Different lenders have varying fee structures. The property’s specific location can affect expenses due to differing municipal conveyance tax rates and local recording fees. Transaction complexity, such as unique title issues or extensive legal work, can also lead to higher attorney fees.

Estimating Your Closing Costs

For buyers, a key resource for estimating closing costs is the Loan Estimate (LE) document provided by lenders. Lenders must provide this document within three business days of a mortgage application. It details estimated closing costs, loan terms, and interest rate, itemizing charges for buyers to understand specific loan fees.

Buyer closing costs range from 2% to 5% of the home’s purchase price, and seller costs (including realtor commissions) range from 6% to 10%. These are broad estimates. For a personalized and accurate estimate, both buyers and sellers should consult their real estate agent, lender, or real estate attorney. These professionals provide detailed breakdowns based on the specific property and transaction.