If you buy or sell a home, you must pay closing costs. Closing costs typically range between 2 and 6% of the selling price of the home, but vary widely depending on the sale price, location of the property, type of loan, and lender fees. The following list of costs are standard costs associated with buying or selling a home.
Application Fee – This is usually the only fee you will pay upfront when applying for a mortgage. Usually, it covers the cost of credit report fees and assessments.
Appraisal – This is paid to the appraiser company to verify the condition and fair market value of the home.
Appraisal Re-Inspection Fee – An appraisal fee pays a professional appraiser to visit the home, evaluate condition and features, and provide an estimate of market value. If any fixes are cited, they should usually be completed and re-examined by an appraiser prior to closing.
Attorney’s Fees – Fees for an attorney to review closing documents on behalf of the buyer or seller.
Closing Fees/Escrow Fees/Settlement Fees – These are paid to the title company, escrow company, or attorney for closing.
Courier/Overnight Fee – This includes the cost of transporting documents to complete the loan transaction.
Credit Report – The tri-combined credit report is used to review your credit history and credit score.
Discount Fees or Points – Additional fees charged for purchasing interest rate drops.
Escrow Deposit for Property Tax & Mortgage Insurance – Funds are placed in your escrow account to ensure sufficient funds are available to pay future property taxes, homeowners insurance, and personal mortgage insurance bills.
FHA Up-Front Mortgage Insurance Premium – If you apply for an FHA loan, you will be required to pay an upfront MIP of 1.75% of the basic loan amount. This fee is usually included in your mortgage.
Flood Determination – This is paid to a third party to determine if the property is located in a flood zone. If the property is found to be within a flood zone, you will need to purchase flood insurance.
Home Inspection – Personal inspection to determine property condition.
Homeowners Insurance – This covers possible damage to your home. Your first year’s insurance is often paid at closing.
Home Guarantee – This is a one-year insurance policy for home appliances and/or electrical, heating, and plumbing systems.
Lender’s Policy Title Insurance – This is insurance to convince the lender that you own the home and the lender’s mortgage is a legal lien. It also protects the lender if there is a problem with the title.
Lead Based Paint Inspection – It may be necessary to determine if there is any lead based paint on the property.
Lock in Fee – A fee charged by the lender to protect the interest rate during the processing and guarantee phases of the loan process.
Owner’s Policy Title Insurance – This is an insurance policy that protects you if someone challenges your home ownership. Many lending institutions need this protection.
Origin Fee – This is a fee charged by some mortgage lenders and covers a portion of the lender’s fees. Usually around 1 percent of the total loan amount, but can be negotiated.
Pest Inspection – This fee includes the cost of termite inspection.
Prepaid Interest – Most lenders will require you to prepay any interest that will accrue between closing and your first mortgage payment date.
Personal Mortgage Insurance (PMI) – If your down payment is less than 20% of the purchase price of the home, you will most likely be asked to pay PMI.
Processing Fees – The lender’s fees used to cover overhead costs.
Property Tax – Lenders usually require taxes due within 60 days of purchase to be paid at closing.
Registration Fees – Fees charged by your local registry office for the recording of public land records.
Survey Fee – This service verifies that there is no disruption to the property you purchased.
Title Insurance Policy – Loan policies are usually based on the dollar amount of the loan and protect the lender’s interest in the property if problems with the title arise.
Title Search – An investigation into the origin and validity of titles for properties.
Title Exam Fee – This fee is paid for searching property records. The title company examines the deed to your new home, ensuring that no one else has a claim to the property.
Transfer Tax – This is a tax paid when title passes from the seller to the buyer.
Underwriting Fees – These are fees your lender may charge to cover the costs of underwriting your mortgage file.
VA Funding Fees – If you have a VA loan, you may be required to pay a VA funding fee at closing (or you can include this fee in the loan if you prefer). This is a percentage of the loan amount the VA assesses to fund the VA home loan program, but disabled veterans are exempt from this fee.
Most types of loans allow the seller to pay a percentage of the selling price against the buyer’s closing costs. FHA mortgages allow the seller to pay up to 6%, conventional loans allow the seller to pay between 2 and 6% of the sale price against the buyer’s closing costs, and for VA loans, the seller is usually allowed to pay all of the buyer’s closing costs. .
Your mortgage lender is required to provide you with a disclosure called a “Loan Estimate” which is a detailed list of closing costs, down payment, and the total costs required to close your mortgage. Many of the fees listed on loan estimates can change as much as 10% of the stated amount, unless your loan program changes. If an unforeseen event occurs and the mortgage program changes to cover your loan, you will receive a form called “Change of Circumstances” which provides a detailed list of each change and discloses your new fees. Once you receive your final approval, your lender will email you a form called “Closing Disclosure” at least 3 days before your actual closing date. Upon receipt of your closing disclosure, you should compare the listed fees with your original loan estimate and/or change in circumstances disclosure to verify that your fees have not changed by more than 10% of the allocated variance.
