What Are Closing Costs?
You've found your dream home, the seller has accepted your offer, your loan has been approved and you're eager to move into your new home.
But before you get the key, there's one more step called the closing. Also called the settlement, the closing is the process of passing ownership of a property from the seller to the buyer.
As a buyer, you will sign what seems like endless piles of documents and will have to present a sizable check for the down payment and various closing costs.
Many of the fees may vary by locality, here are some common fees:
- Appraisal Fee: This fee pays for the appraisal of the property. You may already have paid this fee at the beginning of your loan application process.
- Credit Report Fee: This fee covers the cost of the credit report requested by the lender. This too may already have been paid when you applied for your loan.
- Loan Origination Fee: This fee covers the lender's loan-processing costs. The fee is typically one percent of the total mortgage.
- Loan Discount: You will pay this one-time charge if you have chosen to pay points to lower your interest rate. Each point you purchase equals one percent of the total loan.
- Title Insurance Fees: These fees generally include costs for the title search, title examination, title insurance, document preparation, and other miscellaneous title fees.
- PMI Premium: If you buy a home with a low down payment, a lender usually requires that you pay a fee for mortgage insurance. This fee protects the lender against loss due to foreclosure. Once a new owner has 20 percent equity in their home, however, he or she can normally apply to eliminate this insurance.
- Prepaid Interest Fee: This fee covers the interest payment from the date you purchase the home to the date of your first mortgage payment. Generally, if you buy a home early in the month, the prepaid interest fee will be substantially higher than if you buy it towards the end of the month.
- Escrow Accounts: In locations where escrow accounts are common, a mortgage lender will usually start an account that holds funds for future annual property taxes and home insurance. At least one year advance plus two months’ worth of homeowner's insurance premium will be collected.
- Recording Fees and transfer taxes: This expense is charged by most states for recording the purchase documents and transferring ownership of the property.
If you have questions or are ready to begin the home buying process, just complete the form below, and a member of our team will be in touch shortly!
The Buyer agrees to hire an authorized agent from the Brokerage to assist them in acquiring a property. This is usually an exclusive agreement meaning the Buyer agrees not to enter into another buyer-broker agreement with another real estate agent or brokerage during the terms in the agreement.
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View ResourcesBefore the offer to purchase is created, you must be at least pre-qualified or, better yet, pre-approved by a lender, unless you are paying cash.
View ResourcesOnce your offer is accepted by the seller it starts the offer accepted period. You will be asked for a down payment, typically 1% of the purchase price, on the home you are purchasing which will be held with an attorney or settlement company and applied to the final purchase of your property.
View ResourcesComplete the form below and we'll create you a custom property search. Anytime when we find properties that match your specific criteria we’ll send you an email.
View ResourcesAre you thinking about buying? The video resources below cover many of the common questions that most people have during the home buying journey.
View ResourcesYou've found your dream home, the seller has accepted your offer, your loan has been approved and you're eager to move into your new home.
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