Closing costs are fees associated with purchasing a home that are paid at the time of closing. These costs can vary greatly depending on where you live, the type of home you're buying, and the lender you're working with, among other factors. However, there are some common costs that most home buyers can expect to pay during the closing process.
Loan origination fee: This fee is charged by the lender for processing your mortgage application and can range from 0.5% to 1% of the loan amount.
Appraisal fee: This fee covers the cost of an independent appraisal of the property to ensure that the loan amount is appropriate for the value of the home.
Title search and title insurance: The title search is a review of the public records to verify that the seller is the rightful owner of the property and that there are no outstanding liens or judgments against it. Title insurance protects you from any issues that may arise with the title in the future.
Survey fee: A survey of the property is sometimes required to confirm property boundaries, and this fee covers the cost of having a professional surveyor come out and take measurements.
Recording fee: This fee covers the cost of recording the new deed and mortgage with the local government.
Attorney's fees: Some states require that an attorney be present at the closing, and in those cases, the buyer will be responsible for paying the attorney's fees.
Pre-paid items: These are items that need to be paid in advance, such as property taxes, homeowner's insurance, and mortgage interest.
Discount points: These are fees that can be paid up front to lower the interest rate on your mortgage.
Underwriting fee: This fee covers the cost of the lender's underwriters reviewing and approving your loan.
It's important to note that these are just estimates and your actual closing costs may be higher or lower depending on your specific situation. It's always a good idea to ask your lender for a detailed breakdown of the closing costs and shop around for the best rates and fees. Additionally, some lenders may offer "no-closing cost" mortgages, but be aware that these loans may come with higher interest rates or fees in other areas.
Closing costs can be a significant expense when buying a home, but being aware of the common fees and knowing what to expect can help you prepare and budget accordingly. Don't be afraid to ask questions and negotiate with your lender to ensure that you're getting the best deal possible.