What are Closing Costs?

What are closing costs?

"Closing costs are fees paid at the closing of a real estate transaction. This point in time called the closing is when the title to the property is transferred to the buyer. Closing costs are incurred by either the buyer or the seller."

How much are closing costs?

Closing costs can vary depending on where you live, the area where the property is located and by the lender or service provider you choose. Home buyers will typically pay between 2 to 5 percent of closing costs of the purchasing price of their home. For example, if your home cost $160,000, you might pay between 3,200 and 8,000 in closing costs.

Your lender will give you a Loan Estimate for your home within three business days of receiving your completed loan application. The Loan Estimate will include closing costs but keep in mind those costs are just an estimate and the final numbers can be significantly higher than what was quoted. Many of the fees that make up closing costs are negotiable and you can always shop around with other lenders. There are some lenders who are willing to offer you a loan with lower closing costs. 

Also, three business days before your closing, your lender will give you a Closing Disclosure statement that will outline all of your fees for your closing costs. It is best to have your lender to explain what each fee is and why it is needed.

Examples of potential closing cost fees:

• Deed preparation
• Preparation of closing documents
• Title company title search
• Deed recordation fees
• Owners' title insurance
• Lender's title insurance
• Listing agent's commission
• Selling agent's commission
• Appraisal fee
• Survey fee
• Application fee
• Attorney's fees
• Pest inspection
• Life of loan coverage
• Closing agent fees
• VA funding fee
• Loan discount points
• Escrow fees
• Home inspection
• Prepaid interest
• Courier fee
• Private mortgage insurance
• Underwriting fee
• Lead-Base Paint inspection 
• Prorated real estate taxes, insurance, and/or dues

The examples that are listed are closing costs fees that you may see but it's not likely that they will all be included in your Closing Disclosure statement.