What Are Buyer's Closing Costs in New York? A Complete, No-Surprise Breakdown

You've done the hard work. You've saved diligently, navigated the market, and found your perfect Hudson Valley home. You're focused on the down payment, but there's one final financial hurdle before you get the keys: closing costs. For many first-time buyers, this is where the anxiety kicks in. These costs are often overlooked in the early stages of the home search and can lead to stressful, last-minute financial surprises.

This guide is my promise to you: a complete, no-surprise breakdown of buyer closing costs in New York State. My name is Levan Tsiklauri, and as a real estate advisor in the Hudson Valley, my goal is to empower you with knowledge. We will walk through every single potential fee, line by line, so you can walk into your closing with absolute confidence. No jargon, no hidden fees—just a clear roadmap to your final number.

To start, let's get the most important number on the table. As a rule of thumb, buyers in New York should budget between 2% to 5% of the home's purchase price for their closing costs. This is a significant sum that you will pay in addition to your down payment.

The Big Picture: Budgeting for 2% to 5% of Your Purchase Price

That 2% to 5% range can feel abstract, so let's translate it into real dollars for typical home prices you might see here in the Hudson Valley. This percentage covers a collection of separate fees required by your lender, your attorney, and the government to finalize your mortgage and legally transfer ownership of the property to you. Understanding this budget from the outset is the first step toward a smooth and predictable closing day.

Here is a quick reference table to help you visualize what this looks like for different price points:

Note: As you can see, once a home price reaches the $1 million mark, a unique New York State tax comes into play. We will cover the Mansion Tax in its own dedicated section below.

Where Your Money Goes: A Line-by-Line Breakdown of Fees

So, what exactly are you paying for with that 2-5%? It's not one single fee, but a collection of services and protections from various parties involved in your transaction. To make it easy to understand, we can group these costs into three main categories: fees for your lender, fees for third-party professionals, and funds set aside for future expenses.  

1. Lender & Mortgage Fees (The Cost of the Loan)

These are the fees your bank or mortgage lender charges for the service of creating, evaluating, and funding your home loan. While some of these fees are small, the primary one—the origination fee—can be one of your largest closing costs.

·       Loan Origination Fee: This is the lender's primary fee for processing, underwriting (the formal process of evaluating your financial risk), and funding your loan. Think of it as their main service charge for making the loan happen. This fee is typically calculated as a percentage of the total loan amount, generally ranging from 0.5% to 1.5%. On a $400,000 loan, this would be $2,000 - $6,000. This is also one of the few closing costs that can be directly negotiated with the lender. Comparing Loan Estimates from multiple lenders is the single best way to reduce this fee, as one bank's charge may be significantly lower than another's for the exact same loan.  

·       Appraisal Fee: Before a lender gives you hundreds of thousands of dollars, they need independent verification that the house is actually worth that amount. They hire a licensed, third-party appraiser to conduct a thorough evaluation of the property's condition, features, and recent sales of comparable homes ("comps") in the area. This appraisal protects the lender from issuing a loan for more than the property is worth, and it also protects you from overpaying. In the Hudson Valley, you should budget between $500 to $700 for a standard appraisal, though this can increase for larger or more complex properties.  

·       Credit Report Fee: This is a small but mandatory fee the lender charges to pull your credit history and scores from the three major credit bureaus (Equifax, Experian, and TransUnion). This is a fundamental part of their risk assessment process. The cost is typically minor, ranging from $25 to $100.  

Some lenders might itemize smaller charges like an "underwriting fee" or "processing fee," but these are often just components of the main Loan Origination Fee. The key is to look at the total origination charges in Section A of your official Loan Estimate document.

2. Third-Party & Title Fees (The Cost of Protection & Due Diligence)

This category includes fees paid to various independent professionals and companies who provide essential services to ensure your transaction is legally sound and that your ownership is protected from future claims. The structure of the New York buying process emphasizes proactive risk mitigation; these fees are not just expenses, they are investments in preventing costly future problems.

·       Real Estate Attorney Fee (Mandatory in NY): This is a critical point of distinction for New York. Unlike many other states, New York is an "attorney state," which means you are required to be represented by a real estate attorney from the moment you sign the contract until you close. This is not optional. Your attorney is your single most important advocate in the process. They will review and negotiate the contract of sale, explain the terms of your mortgage commitment, resolve any title issues that arise, and ensure your legal interests are protected at every turn. While some firms may advertise very low flat fees, a realistic budget for an experienced, local Hudson Valley attorney is between $1,500 and $4,000. This is not an area to cut corners; a great attorney can save you from immense stress and financial loss.  

·       Title Search & Title Insurance: This is a crucial but often misunderstood two-part process.

o   The Title Search: Before you can own the property, your attorney and a specialized title company perform a deep dive into the property's public records. They are searching for any "defects" or "encumbrances" on the title—things like unpaid property taxes from a previous owner, outstanding liens from contractors who were never paid, or even a surprise heir who might have a legal claim to the property.  

o   Title Insurance: This is a one-time insurance policy you purchase at closing that protects you and your lender from any of these past issues that might surface after you've become the owner. There are two types of policies:  

§  Lender's Policy: This is required by your mortgage lender and protects their investment in the property.

§  Owner's Policy: This is technically optional but highly recommended. It protects your equity and your right to the property for as long as you or your heirs own it. The cost varies by county and purchase price, but you can generally estimate the total for the search and both policies to be around 0.5% of the home's purchase price.  

·       Home Inspection Fee: While a home inspection is not always required by the lender, it is your single best tool for understanding the true condition of the property you are about to buy. A licensed inspector will evaluate the home's major systems—roof, foundation, plumbing, electrical, HVAC—and provide a detailed report on their condition. A general inspection for a standard-sized home in the Hudson Valley typically starts around $400 - $500. However, given the nature of properties in our area, several additional inspections are common and highly recommended:  

o   Radon Test: Radon is a naturally occurring radioactive gas that is common in our region. A test typically costs $100 - $200.  

o   Well Water Quality Test: If the home has a private well, you'll want to test the water for bacteria and other contaminants. This can range from $125 to $325 depending on the comprehensiveness of the test.  

o   Septic Inspection: For homes with a septic system, a thorough inspection is crucial to ensure it's functioning properly. This can cost $500 - $800. A comprehensive inspection package covering all these bases can easily cost $800 - $1,200 or more, but the information it provides is invaluable for negotiation and peace of mind.  

·       Recording Fees: This is a fee paid to your county (e.g., Dutchess, Westchester, Ulster) to officially record the new deed and mortgage in the public record, legally cementing your ownership. This is typically a modest fee, around $120 - $200.  

3. Prepaid Expenses & Escrow (The Cost of Future Security)

This is often the most confusing category for first-time buyers because these are not fees for past services. Instead, this is money you pay upfront at closing to fund special accounts for future expenses, primarily your property taxes and homeowners insurance.

·       Prepaid Homeowners Insurance: Your lender will require you to have a homeowners insurance policy in place and active on the day of closing. At the closing table, you will be required to pay the entire premium for the first year of your policy upfront. In the Hudson Valley, a typical annual premium might be $1,200 - $1,700, though this can vary widely based on the home's value, location, and your coverage choices.  

·       Property Tax Escrow: An escrow account is essentially a savings account managed by your mortgage lender to pay your property taxes and future homeowners insurance premiums on your behalf. Each month, a portion of your total mortgage payment (specifically, 1/12th of your estimated annual tax and insurance bills) is deposited into this account. When the bills come due, your lender pays them for you from this account. At closing, the lender needs to pre-fund this account with a cushion to ensure there's enough money to make the first payments. Lenders will typically collect 2 to 6 months of property taxes at closing to establish this cushion. This can be a substantial amount. For example, if your annual property taxes are $12,000 ($1,000 per month), you could be required to deposit $2,000 to $6,000 into your escrow account at closing. This direct link between local tax rates and upfront cash requirements means that when you compare two homes with the same price but in different towns, the one in the town with higher taxes will require a significantly larger check at closing.

·       Prepaid Daily Interest: Your first official mortgage payment is typically not due until the first day of the month after your closing month. For example, if you close on September 15th, your first full mortgage payment won't be due until November 1st. At closing, you will pay the mortgage interest for the remaining days of the month in which you close (in this example, from September 15th through September 30th).

The New York Special: Understanding the "Mansion Tax"

There is one closing cost unique to New York that can be a major surprise for buyers at the higher end of the market: the NYS Mansion Tax. This is a critical fee to understand as it can add a significant amount to your out-of-pocket expenses. The rule is simple: If the purchase price of your residential property is $1 million or more, you, the buyer, are required to pay a tax of 1% of the total purchase price. It's important to understand that this is a "cliff" tax. A home purchased for $999,999 has $0 in Mansion Tax. A home purchased for just one dollar more, at $1,000,000, has a $10,000 tax bill due at closing. This is not a negotiable fee; it is a state tax.

Here are two clear examples:

·       On a $1,000,000 home, the Mansion Tax is $10,000.

·       On a $1.5 million home, the Mansion Tax is $15,000.

This tax creates a significant financial and psychological barrier in the market right around the $1 million price point. A buyer considering a home listed at $1.02 million isn't just thinking about the extra $21,000 in loan amount; they must also account for an additional, non-financable $10,200 in cash needed at closing. This reality often influences bidding and negotiation strategies. It is not uncommon for a deal to be structured to close at $999,999 to avoid triggering the tax, a move that can save the buyer nearly $10,000 in immediate out-of-pocket cash.

For official details, you can refer directly to the (https://www.tax.ny.gov/).  

Your Top Questions, Answered

As you get closer to your purchase, certain questions always come up. Here are direct answers to the most common ones I hear from buyers in the Hudson Valley.

Who Pays the Real Estate Agents?

This is one of the most frequent questions, and the answer brings good news for buyers. In New York, the long-standing tradition is that the seller pays the commission for both their own agent (the listing agent) and the buyer's agent. This commission is paid out of the seller's proceeds from the sale at closing, meaning it is not an out-of-pocket closing cost for you, the buyer. While there have been recent national discussions and legal changes regarding agent commissions, the common practice in New York remains for sellers to offer this compensation, often as a concession, to make their home more attractive and accessible to the largest possible pool of buyers.  

Are My Closing Costs Tax Deductible?

Unfortunately, the answer is mostly no. The IRS views most buyer closing costs (like the appraisal fee, attorney fees, home inspection, and title insurance) as part of the cost of acquiring the home, not as an expense you can deduct from your income in the year of purchase. However, there are two important exceptions:  

1.     Prepaid Mortgage Interest (Points): If you paid "points" to your lender to lower your mortgage's interest rate, that amount is considered prepaid interest and is generally fully deductible on your tax return for the year you paid it.  

2.     Prepaid Property Taxes: The portion of your property taxes that you paid at the closing table is deductible in the year you paid it. However, this deduction is subject to the $10,000 annual cap on state and local tax (SALT) deductions.  

There is a silver lining for the non-deductible costs. You can add these expenses to your home's "cost basis." This increases the official purchase price of your home in the eyes of the IRS. When you eventually sell the home many years from now, a higher cost basis can reduce the "profit" on your sale, which in turn can lower your capital gains tax liability.  

Actionable Strategy: How You Can Reduce Your Closing Costs

While many costs are fixed, you are not powerless. There are several effective strategies you can use to lower the amount of cash you need to bring to the closing table.

1.     Negotiate for "Seller Concessions" This is the single most powerful tool for reducing your immediate out-of-pocket expenses. A "seller concession" is an agreement where the seller pays for a portion of your closing costs. This is often negotiated by slightly increasing the purchase price. For example, on a $400,000 home, you might offer $406,000 and ask the seller for a $6,000 concession toward your closing costs. This effectively allows you to finance most of your closing costs into your loan instead of paying for them with cash. It's important to know that lenders have limits on how much a seller can contribute, which vary by loan type. FHA loans allow up to 6% of the purchase price, while conventional loans typically allow for 3% to 9% depending on the size of your down payment. The final, higher purchase price must also be supported by the home's appraised value.  

2.     Shop Around for Your Lender and Services Not all fees are set in stone. You have the right to shop around for the best deal. You should get an official Loan Estimate from at least three different lenders and compare their Loan Origination Fees (listed in Section A of the estimate). You also have the right to shop for your own Title Insurance provider (listed in Section C). A few phone calls to different lenders and title companies can easily save you hundreds, or even thousands, of dollars.  

3.     Schedule a Strategic Closing Date This is a simple but effective trick to reduce one specific cost: prepaid daily interest. As we discussed, at closing you must pay the mortgage interest for every day remaining in that month. By scheduling your closing for the last few days of the month, you minimize the number of days of interest you have to prepay. Closing on the 28th of a month instead of the 5th can save you a few hundred dollars in cash needed at the table.  

Conclusion: Closing with Confidence

The journey to homeownership is filled with major milestones, and the closing is the final, celebratory step. The costs involved can seem daunting at first, but they are not a mystery. By understanding where your money is going—from the lender fees that secure your loan, to the third-party fees that protect your investment, to the prepaid funds that secure your future—you transform anxiety into empowerment.

With this breakdown, you now have a predictable roadmap. You know the key New York-specific costs to watch for, like the mandatory Attorney Fee and the Mansion Tax, and you have actionable strategies to manage your final expenses. Understanding these costs is the final step to transforming you from an anxious house-hunter into a confident homeowner, ready to receive the keys to your new life in the Hudson Valley.

Let's Map Out Your Budget

This guide gives you the map, but every journey is unique. Navigating these costs is a critical part of a successful home purchase. Want a personalized estimate based on your specific price range and property? Let's connect for a free, no-obligation buyer consultation to map out your exact budget from start to finish.

Levan Tsiklauri (LT) | Realtor®| [ Book a Consultation▸]

(917) 905-7923 | Levan@realtylt.com | www.realtylt.com

RealtyLT | United Real Estate | 1097 Route 55, Suite 9, Lagrangeville, NY 12540