Buying a home in Philadelphia comes with an extra line in your budget: closing costs. If you are planning your down payment and monthly payment, it is easy to overlook these one-time fees and prepaids. The good news is you can estimate them early, verify them before settlement, and often reduce them with smart choices. In this guide, you will learn what closing costs include in Philadelphia, how local taxes factor in, and the simple steps to plan with confidence. Let’s dive in.
What closing costs include
Closing costs are the fees and prepaids you pay at settlement, separate from your down payment. A common planning range is 2 to 5 percent of the purchase price, but your final number depends on your loan, the property, and local taxes. For definitions and timelines on the Loan Estimate and Closing Disclosure, review the Consumer Financial Protection Bureau’s resources on closing costs and disclosures at the Consumer Financial Protection Bureau.
Loan and lender fees
You can expect items like loan origination or processing fees, an appraisal, a credit report fee, and possible discount points if you choose to buy down your rate. If your down payment is less than 20 percent on a conventional loan, private mortgage insurance may apply. Lenders may also include small charges for flood certification or other required third-party checks.
Title and settlement costs
In Pennsylvania, closings are typically handled by a title company or an attorney. You will see fees for the title search, title insurance policies, and settlement services. Your lender will require a lender’s title insurance policy. An owner’s title insurance policy is optional but worth considering to protect your equity; you can learn more at the American Land Title Association.
Prepaids and prorations
Prepaids are not fees, but advance payments collected at closing. These usually include your first year of homeowner’s insurance, initial deposits to start your escrow account, and prorated property taxes based on the closing date. If the home is in an HOA or condo association, you may see transfer or move-in fees and prorated dues.
Inspections and surveys
Before closing, you may pay for a general home inspection and, if applicable, tests for wood-destroying insects, radon, sewer scope, or other specialty inspections. A survey may be required by your lender or requested for title review.
Taxes and transfer fees
Transfer taxes and recording fees are a key local factor in Philadelphia. The City of Philadelphia levies a local real estate transfer tax and Pennsylvania levies a state realty transfer tax. Rates and rules can change, so check the current guidance at the Philadelphia Department of Revenue and the Pennsylvania Department of Revenue. Recording fees to file the deed and mortgage are set by the local records office; you can find fee schedules and instructions at the Philadelphia Department of Records.
Estimate your closing costs
Use this simple process to get a realistic number early:
Request your Loan Estimate. After you apply, your lender must provide a Loan Estimate within three business days. This outlines your interest rate, loan terms, and lender-related costs. If you are comparing lenders, request Loan Estimates from more than one. The Consumer Financial Protection Bureau explains how to read and compare these forms.
Ask a title company for an itemized estimate. Once you choose a title company or settlement agent, request a line-by-line estimate for title insurance, settlement fees, transfer taxes, and recording fees. You can cross-check recording information at the Philadelphia Department of Records.
Verify transfer taxes. Confirm the current city and state transfer tax rates and any exemptions with the Philadelphia Department of Revenue and the Pennsylvania Department of Revenue.
Add prepaids and escrows. Include your first year of homeowner’s insurance, several months of escrow deposits for taxes and insurance, and any HOA or condo-related items.
Use 2 to 5 percent as a cross-check. This planning range can help you sense-check your estimates while you verify local taxes and fees.
Philadelphia transfer tax and recording
Transfer taxes can be one of the larger line items in a Philadelphia purchase. The exact percentage and how it is allocated between buyer and seller can vary by contract and local practice. Always confirm the current rates and your obligations in your specific deal using the official pages of the Philadelphia Department of Revenue and the Pennsylvania Department of Revenue. If you have questions about who pays what, review your agreement of sale and consult your settlement agent. You can also reference professional resources from the Pennsylvania Association of Realtors for general practice guidance.
Ways to reduce or offset costs
- Shop your loan. Compare at least two lenders. Ask which fees are fixed, which are optional, and how discount points change your monthly payment versus cash due at closing.
- Compare title quotes. Title insurance premiums are set by state rules, but settlement and ancillary fees can vary. Request written quotes and ask about bundled pricing.
- Request seller credits. You can negotiate for a seller credit toward closing costs. Your maximum credit may be limited by your loan program and the appraisal, so coordinate with your lender.
- Review owner’s title insurance. It is a one-time premium that protects your ownership. Learn what it covers at the American Land Title Association and request a quote so you can compare value.
Protect your funds from wire fraud
Settlement funds are often paid by wire transfer or certified funds. If you wire, always confirm instructions by calling a known phone number for your title company or attorney. Be wary of emailed changes. Do not use a phone number listed only in an unexpected email. A quick verification call can prevent costly fraud.
Who handles closings in Pennsylvania
In Pennsylvania, title companies and attorneys commonly conduct settlement. Your lender may have requirements for the type of settlement agent. Ask early who will handle your closing and which fees that party charges. If you want legal advice about your contract or obligations, consult a Pennsylvania real estate attorney.
Buyer checklist for Philadelphia
- Get your Loan Estimate from your lender.
- Choose a title company and request an itemized estimate.
- Confirm current transfer tax rates with the city and state.
- Ask about escrow deposits and prepaids for taxes and insurance.
- Verify all wiring instructions by phone before sending funds.
- Review your Closing Disclosure at least three days before settlement and ask questions about any changes.
Next steps
When you understand the moving parts, closing costs stop being a mystery. Start with your Loan Estimate, get a detailed title quote, and confirm local taxes with the city and state. If you want a personalized plan and a clear path from offer to keys, let’s talk. Unknown Company is here to guide you through each step so you can buy with clarity and confidence. Request a VIP Consultation.
FAQs
How much should a Philadelphia buyer budget for closing costs?
- A common planning range is 2 to 5 percent of the purchase price, then refine your estimate with a lender’s Loan Estimate and a title company’s itemized quote, and verify local taxes with the city and state.
Who pays Philadelphia real estate transfer taxes at closing?
- The allocation can vary by contract and local practice, so check your agreement of sale and confirm with your settlement agent, then verify current rules at the Philadelphia and Pennsylvania revenue departments.
Are real estate commissions part of a buyer’s closing costs in Philadelphia?
- Typically, commissions are paid by the seller from the seller’s proceeds, but confirm your specific arrangements in the listing and buyer representation agreements.
What payment methods can I use for my Philadelphia closing?
- Settlement agents usually require a wire transfer, certified check, or cashier’s check; get exact instructions in writing and confirm wiring details by phone to prevent fraud.
Do I need a real estate attorney to close in Pennsylvania?
- Many Pennsylvania closings are handled by title companies, but you may choose to retain an attorney; ask your lender and settlement agent about requirements and fees.
Should I buy an owner’s title insurance policy in Philadelphia?
- It is optional but recommended to protect your ownership; review coverage details with your title company and learn more at the American Land Title Association.
