When buying a home in Kentucky, it’s not just about price—you also need to consider closing costs. Closing costs are the final expenses that must be paid to complete a real estate transaction, such as taxes, lender fees, and title insurance.

In this Redfin article, we discuss what closing costs are in Kentucky, who typically pays them, and what you’ll have to pay as a buyer or seller. From lender fees to insurance, we’ll explain what you need to know to budget wisely and make your home buying process as smooth as possible.

What are the average closing costs in Kentucky?

In addition to the down payment, homebuyers must also pay closing costs before they receive the keys to their new home. Closing costs in Kentucky range from 2% to 5% of the purchase price of the home. Keep in mind, however, that this is just a range and the total amount will depend on many factors, such as the purchase price of the home, the type of loan, and any adjustments negotiated with the seller.

For example, if you buy a home in Lexington, where the average sales price is $329,475, closing costs could range from $6,590 to $16,474. Or let’s say you buy a home in Louisville, where the average sales price is $267,000. Closing costs for a home here could range from $5,340 to $13,350.

Who pays closing costs in Kentucky?

So who pays closing costs in Kentucky? In most transactions, both the buyer and the seller pay closing costs. However, the amount of each party’s closing costs depends on what they have 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 proceeds of the home sale.

Closing Costs for Buyers in Kentucky

As a home buyer in Kentucky, you can expect to pay 2-5% of the purchase price. If you made a down payment, that amount will be deducted from your closing costs, reducing the total amount you owe at closing. The down payment is usually 1-3% of the home price. Let’s break down some of the common closing costs that are paid by the buyer:

• Valuation fee: Property appraisals, which typically cost between $300 and $500, are usually paid separately at the time of service, but if not, you will have to pay this at closing.
• Examination fee: Home inspections generally cost between $300 and $500 – it can vary depending on local rates and the specific characteristics of the property. If you do not pay for the inspection at the time of service, it must be paid at closing.
• Loan processing fee: Your lender may charge a fee to provide your loan. It’s important to ask what these costs cover and whether they’re negotiable to avoid potentially high costs.
• Processing fee for the loan: Lenders may also charge a loan origination fee, which covers loan origination and related services. Check with your lender to learn the purpose and possible waivers, similar to the origination fee.
• Credit discount points: If you purchased points to lower your interest rate, you typically pay a one-time fee at closing. Each point can lower your interest rate by 0.25% to 0.5%. Before purchasing points, consider how long you plan to own the home or if you plan to refinance.
• Private Mortgage Insurance (PMI): If your down payment is less than 20%, you’ll typically have to pay private mortgage insurance (PMI). Some loans allow you to pay PMI up front at closing, giving you the option of making higher down payments or higher monthly payments.
• Title insurance: Title insurance is a one-time closing fee, with the buyer typically paying for both the lender’s and the owner’s policy.
• Building insurance: In Kentucky, your annual homeowners insurance premium may be part of your closing costs.
• Contributions to the homeowners association: For homes in HOA-managed communities, you may be required to pay a monthly fee upon completion of the purchase. This can vary depending on the property and covers maintenance and operating costs.
• Property taxes: As part of closing costs in Kentucky, you may be required to pay a portion of your property taxes up front at closing.

Seller’s Closing Costs in Kentucky

Closing costs paid by sellers in Kentucky can vary, but here are some common closing costs paid by sellers:

• Brokerage commissions: These fees can be a significant burden for sellers. Commission fees can vary and are negotiable. Sellers should discuss their options with their agent.
• Homeowners Association Fees: If the property is part of an HOA, the seller may have to pay various fees. These may include HOA transfer fees, outstanding dues, and possibly a fee to obtain the HOA documents needed by the buyer. The exact fees depend on the HOA’s rules and regulations.
• Property taxes: Sellers are responsible for any property taxes that have accrued but not been paid by the closing date. These unpaid property taxes are usually prorated for the months you owned the property.
• Title insurance: Sellers typically cover the cost of the buyer’s title insurance. This policy protects the buyer against potential title problems that may arise after the property is sold. The cost of title insurance can vary, but is generally based on the selling price of the home.
• Transfer taxes: When you sell a home in Kentucky, you can expect to pay state transfer taxes. These taxes are typically calculated based on the sale price or appraised value of the property. The exact tax rates and regulations can vary widely, so it’s important to know the requirements in your area and consider these potential costs when selling a home.

Median home sale price data from Redfin Data Center as of July 2024.