Your Guide to Closing Costs in Pennsylvania

Beautiful scenery, dynamic industry, a wide variety of cultures – welcome to the Keystone State. Are you a homebuyer moving to Pennsylvania? If so, make sure you are saving up for closing costs alongside your down payment.

Along with saving for a down payment and securing a home loan, homebuyers must budget for closing costs, regardless of where they plan to live. But bear in mind, Pennsylvania has some of the most expensive closing costs in the U.S.

In a nutshell, closing costs are all the administrative and legal fees you will need to pay before you receive the keys to your new home. They include the various expenses you will incur during the homebuying process. You will need to pay your lender, appraiser, home inspector, insurance provider, and the taxman, just to name a few. Instead of paying for each service one-by-one, closing costs are cobbled together and paid in a single sum on closing day. Typically, they amount to about two to five percent of a home’s purchase price.

If you are buying a new home in Pennsylvania, NewHomeSource has put together the following guide to help you determine how much you should be saving for closing costs, state-specific rules, and how you can potentially lower these costs.

How Much are Closing Costs in Pennsylvania?

Closing costs in Pennsylvania are, on average, $10,634 for a home loan of $248,561, according to an article by the National Association of Realtors. That price tag makes up 4.3 percent of the home’s price tag.

Pennsylvania is among some of the highest closing costs in the United States. Pennsylvania also has the second highest percentage spent on closing costs after Delaware at 5.4 percent.

But homebuyers in the Keystone State should expect to spend far more than these estimates. This data excluded two major closing cost expenses – loan origination fees if you need to take out a home loan, and private mortgage insurance – or PMI, which homebuyers must purchase if their down payment is less than 20 percent. Both expenses can add thousands to their closing costs tab.

Homebuyers in Pennsylvania may also need to pay for extra home insurance premiums to cover winter storm damage and other extreme weather losses.

Home values have risen, driving up closing costs, too. As of September 2024, the median sale price for single-family homes was $295,000, up 9.2 percent from the prior year, according to the Pennsylvania Association of Realtors.

Overall, closing costs will fluctuate greatly depending on a handful of factors, such as the price and location of the home, down payment, credit score, and the type of mortgage.

What Is Typically Included in Pennsylvania’s Closing Costs?

Each state has its own set of rules when it comes to real estate closings, from hiring an attorney to paying for real estate transfer taxes. To help you navigate what to expect, we’ve grouped your closing costs into three fee categories.

Here's what to expect in Pennsylvania:

Mortgage-Related Fees

Unless you have the cash on hand to buy your new home outright, your first stop in the homebuying process will be to your lender to apply for a mortgage. The following are the closing cost fees you’ll incur, including the protocol for hiring an attorney:

Loan Origination Fees

Anticipate loan origination fees of about 0.5 percent to 1 percent of your total loan to start. Your lender will charge you for the work involved with setting up your home loan. This includes steps, such as preparing your application, conducting an underwrite, producing preapproval letters, and managing the administrative work involved in funding your loan at closing.

Credit Report Fees

Just like when you apply for a credit card or personal loan, your lender will need to pull your credit history with the various bureaus to see how you have managed previous debt. The lender will pass along any expenses they incur for pulling your credit report. If more than one borrower is on the loan application, double this cost.

Private Mortgage Insurance

If you are not providing a 20 percent down payment, your lender will expect you to buy private mortgage insurance. This allows borrowers to qualify for a conventional loan even if they put down only five to 19.99 percent. While you are paying for the insurance, the coverage is for your lender in case of default.

PMI typically ranges from 0.25 percent to 2.25 percent of your loan. Once you hit the 20 percent mark in home equity, you do not have to pay for PMI.

Attorney Fees

While some states require buyers to hire a real estate attorney to help with the legal aspects of their closing process, this clause doesn’t apply to Pennsylvania. You may still decide to hire a lawyer though, especially if your home purchase is a complex one.

You can count on an attorney to help draft your purchase agreement, examine your mortgage contract, certify deeds, and review your home insurance and title insurance policies.

Legal fees will vary, depending on the complexity of the sale. Some attorneys bill by the hour while others may charge a retainer fee.

Property-Related Fees

Before you trade away your nest egg to make the biggest purchase of your life, the property you are buying will need to clear some pivotal checkpoints. Common property-related fees include:

Title Search and Title Insurance

Whether you are buying a brand-new home or a resale property, homebuyers must pay for a title examination to ensure they are buying property that is free of ownership disputes, unpaid taxes, judgments, or outstanding lawsuits. The title search includes examining historical records, such as deeds, court records and property and name indexes.

Once it is complete, you will need to cover your bases with two title insurance policies, for the owner and another for the lender. This expense will cover all court costs and related fees if something is missed in the initial title search and there is a claim on your property.

Unlike other types of insurance, title insurance is a one-time expense that stays in effect until you sell your property, and it protects both parties in case of “defects in title.”

In Pennsylvania, buyers are typically on the hook for all title-related fees. This rule is not set in stone. You may end up shifting this expense during negotiations to the seller.

Real Estate Transfer Tax

Whenever real estate changes hands, buyers and sellers need to account for a transfer tax during closing. In the Keystone State, buyers and sellers split this tax, with each party paying 1 percent of the purchase price to the state’s Department of Revenue. Bear in mind, local municipalities may charge their own transfer taxes.

There are some exemptions, though: If you are transferring property between family members, for example, you are off the hook for this tax.

Property Appraisal

Before your lender agrees to issuing your home loan, they will send a third-party appraiser to assess the property. This is a pivotal moment in your homebuying journey. Essentially, your lender needs to ensure your potential new home is priced at the right market value. If you default on your loan, it is your lender that needs to sell the property to recoup its losses.

The appraiser will scan the home, its size, key features, and condition, to compare how it stacks up to similarly priced homes in the neighborhood. While its your lender that arranges this step, you will pick up the tab.

Property Inspection

While an appraiser evaluates whether your new home is priced correctly, you will also need to hire a home inspector whose job is to check on the health and safety of your big purchase.

Your home inspector’s job is to check on the home’s condition, from the roof to the foundation, to major appliances, drainage systems, and heating and ventilation.

This cost is worth every penny. Listen to the inspector’s feedback. He or she will flag any issues and repairs you may be inheriting now or down the road. You can bring this intel back to your seller for further negotiations before finalizing the deal.

Annual Fees

Homeownership comes with its fair share of responsibilities from seasonal maintenance to staying on top of recurring bills. Your closing costs will include a handful of fees that you need to start paying annually, including:

Property Taxes

In Pennsylvania, homeowners pay about 1.26 percent of their home’s assessed market value in property taxes, according to the Tax Foundation. This amount will may be higher or lower because property taxes are collected on a county level, with each region setting its own tax rate. You can check out your county’s property tax rate.

Property taxes are a prepaid expense, meaning they need to be paid at closing and can’t be rolled into your home financing. As part of your closing costs, you will need to pay for the first six to 12 months.

They are due annually on March 31st.

Homeowner’s Insurance

Home insurance is another mandatory purchase you will need to make before your lender agrees to issue your home loan.

By closing, you must have a homeowner’s insurance policy paid for and in effect for the first year. While it is mandatory, it is worth it for your peace of mind – home insurance covers any physical damage to your home caused by fire, wind, vandalism, or theft.

Verify whether you will need additional insurance policies to cover extreme weather losses. Also, you will need to decide if you want to insure expensive heirlooms, artwork, and jewelry.

How Can I Lower My Closing Costs in Pennsylvania?

With some of the most expensive closing costs in the country to deal with, Pennsylvanian homebuyers may be feeling the sticker shock. Do not fret, though. There are plenty of strategies that can help you drive down the costs. They include:

Closing Cost Assistance

Start by taking advantage of Pennsylvania’s homeownership assistance programs as these programs could put a significant dent in your closing costs.

The Pennsylvania Housing Finance Agency, for example, has its HOMEstead Downpayment and Closing Cost Assistance Loan for eligible candidates. Additionally, the Keystone Home Loan Program is also available based on eligible income and purchase price.

Check on local homeownership programs in your county, too. From Berks County to Pittsburgh, Scranton and Upper Darby, there are dozens of grants, closing cost assistance and other financial incentives up for grabs for eligible homebuyers.

Get Your Finances in Shape

If your credit score is in bad shape, work on boosting it before shopping for a home loan. With a better credit score in hand, you’ll be able to secure a competitive interest rate, saving you thousands over the lifetime of your mortgage.

Apply as much as you can toward your down payment, too. The closer you get to the 20 percent threshold, the less you’ll have to pay in PMI.

Comparison Shop

While some closing cost fees are fixed, such as the appraisal and property taxes, you can shop around for some services, such as your lender, home inspector, and title company.

Take time to compare vendors, ensuring they are appropriately accredited with glowing reviews from previous customers. With a shortlist in hand, ask for quotes so you can make sure you are getting the best deal.

Negotiate Lender Fees

If you have a longstanding, established relationship with your lender, you may have some wiggle room with your loan setup fees.

You could ask your lender to omit certain expenses from your bill, such as rate lock fees, loan processing fees or broker rebates. If that does not work, you could also ask to stagger these expenses, so they are paid in stages instead of all at once at closing.

Seller Concessions

Do not shy away from negotiating on who pays for which closing cost expenses with the seller, especially if you are in a buyer’s market.

Try to reassign some of the closing costs. For example, you can submit a full-price offer with a caveat that the seller must pick up all your closing costs. If you are building a new home, you could ask the builder to cover your closing costs in exchange for paying for a handful of pricy upgrades.

No-Closing-Cost Mortgages

With a “no-closing-cost” mortgage, your lender agrees to pay for part or all your closing costs, but you must pay a higher interest rate.

Be careful with this option: It could cost you more money overall because of the bump in your interest rate.

Add Closing Costs to Your Home Financing

Aside from the prepaid expenses that must be paid at closing, you could opt to roll your closing costs into your home loan. This could add thousands to your mortgage. You will not have to pay for closing costs on closing day, but your monthly mortgage payments will be a bit higher.