Closing costs are fees paid at the home closing, which is when the title of a residence is transferred from the seller to the buyer. These costs typically include real estate commissions, escrow fees, document recording fees, lawyer fees, title insurance fees, survey fees, and taxes. These costs can also include the expenses the home has incurred by buyers and sellers during any negotiations. Closing costs vary widely based on where you live, the property you buy, and the type of loan you choose.
What "Costs" Are There?
Here is a list of fees that may be included in closing:
- Application Fee: This fee covers the cost for the lender to process your application.
- Appraisal: This is paid to the appraisal company to confirm the fair market value of the home.
- Attorney Fee: This pays for an attorney to review the closing documents on behalf of the buyer or the lender.
- Closing Fee or Escrow Fee: This is paid to the title company, escrow company or attorney for conducting the closing. The title company or escrow oversees the closing as an independent party in your home purchase. Some states require a real estate attorney be present at every closing.
- Courier Fee: This covers the cost of transporting documents to complete the loan transaction as quickly as possible.
- Escrow Deposit for Property Taxes & Mortgage Insurance: Often you are asked to put down two months of property tax and mortgage insurance payments at closing.
- Home Inspection: You will likely get your own home inspection to verify the condition of a property and to check for home repairs that may be needed before closing.
- Home Owners Association Transfer Fees: The seller will pay for this transfer which will show that the dues are paid current, what the dues are, a copy of the association financial statements, minutes and notices. The buyer should review these documents to determine if the association has enough reserves in place to avert future special assessments.
- Homeowners’ Insurance: This covers possible damages to your home. Your first year’s insurance is often paid at closing.
- Lender’s Policy Title Insurance: This is insurance to assure the lender that you own the home and the lender’s mortgage is a valid lien, and it protects the lender if there is a problem with the title.
- Loan Discount Points: “Points” are prepaid interest. One point is one percent of your loan amount. This is a lump sum payment that lowers your monthly payment for the life of your loan.
- Owner’s Policy Title Insurance: This is an insurance policy that protects you in the event someone challenges your ownership of the home. It is usually optional.
- Origination Fee: This covers the lender’s administrative costs. It’s usually about 1 percent of the total loan but you can sometimes find mortgages with no origination fee.
- Pest Inspection: This fee covers the cost to inspect for termites or dry rot, which is required in some states and required for government loans. Repairs can get expensive if evidence of termites, dry rot or other wood damage is found.
- Prepaid Interest: Most lenders will ask you to prepay any interest that will accrue between closing and the date of your first mortgage payment.
- Property Tax: Typically, lenders will want any taxes due within 60 days of purchase by the loan servicer to be paid at closing.
- Recording Fees: A fee charged by your local recording office, usually city or county, for the recording of public land records.
- Survey Fee: This fee goes to a survey company to verify all property lines and things like shared fences on the property. This is not required in all states.
- Title Search: This fee is paid to the title company for doing a thorough search of the property’s records. The title company researches the deed to your new home, ensuring that no one else has a claim to the property.
- Transfer Taxes: This is the tax paid when the title passes from seller to buyer.
- Underwriting Fee: This also goes to your lender, covering the cost of researching whether or not to approve you for the loan.
Typically, home buyers will pay between about 2 to 5 percent of the purchase price of their home in closing fees. According to a recent survey, on average buyers pay roughly $3,700 in closing fees. So, if your home cost $150,000, you might pay between $3,000 and $7,500 in closing costs.
Your lender will give you a loan estimate for your loan, which will include what the closing costs on your home will be, within three business days of receiving your completed loan application. But these are just an estimate, and many of the fees listed can change. If they do change, you may receive a revised loan estimate so there are no surprises along the way.
We here at Tom Crimmins Realty, operate on most of the busiest neighborhoods of Staten Island and believe each is equally important as the next with unique attractions to show its residents. If you have any questions regarding loans or closing costs, or an in need of a recommended mortgage lender, come visit our office at 304 Manor Road, visit our website, or call us at 718-370-3200.