The process of searching for a new home calls for juggling a lot of details. One piece of information that often gets pushed aside until transaction time is how much one will pay in closing costs. These are fees that vary by transaction, your lender’s requirements, and individual circumstance. Since closing costs typically range from two to five percent of a home’s purchase price, they shouldn’t be left as an afterthought. Here are some typical fees you’ll encounter at closing.
Closing Fee: The title company is paid this fee for facilitating all aspects of the closing as an independent party in your home purchase.
Courier Fee: This covers the cost of transporting documents to complete the loan transaction in a timely manner.
Title Company Title Search or Exam Fee: The title company conducts a thorough search of the property’s records and researches the deed to your new home. This is necessary to determine if anyone else has a claim to the property.
Transfer Taxes: This is the tax paid when the title passes from seller to buyer.
Credit Report: Your lender pulls your credit report to get your credit history and score. Your credit score is a big determining factor of the rate you’ll get for the loan.
Appraisal: Your lender will require an appraisal of the home you’re buying. An appraisal fee is paid to the appraisal company to confirm the fair market value of the home.
Underwriting Fee: Your lender charges this fee for covering the cost of researching whether you can afford the loan.
Origination Fee: Lenders often charge for administrative costs as high as one percent of the loan. But you can shop around for lenders who do not charge this fee.
Prepaid Interest: Most lenders will ask you to prepay any interest that will accrue between closing and the date of your first mortgage payment.
Private Mortgage Insurance (PMI): If your down payment is less than twenty percent of the purchase price, you’ll need to pay the first month’s PMI payment at closing.
Escrow Deposit for Property Taxes and Mortgage Insurance: Lenders often require that you put down two months of property tax and mortgage insurance payments at closing.
Homeowners’ Insurance: Lenders typically require that you pay the first year’s insurance at closing.
Lender’s Policy Title Insurance: This insurance assures the lender that you own the home and the lender’s mortgage is a valid lien. It also protects the lender if there is a problem with the title.
Loan Discount Points: “Points” are a type of prepaid interest or fees mortgage borrowers can purchase that lowers the amount of interest they have to pay on subsequent payments. If you’ve agreed to purchase points, the fee will show up at closing.
Property Tax: The seller of the home may accumulate property taxes that don’t become due until after the buyer has already assumed ownership. In such cases, the title company typically prorates the taxes, which involves calculating the proportions of the taxes that the seller and buyer each owe.
Recording Fees: Your local recording office, usually city or county, charges this fee for the recording of public land records.
Survey Fee: Survey fees are charges if a survey company is needed to verify all property lines.
Closing fees are required by law to be stated formally in a Closing Disclosure statement, prepared by the lender. Each party of a real estate transaction should receive their Closing Disclosure within three days prior to the scheduled closing. Your agent can help answer any questions you may have about the document.