Understanding Closing Costs

Closing Cost Guide

Sellers Generally Pay

Buyers Generally Pay

Real Estate Commission Title Insurance Premiums*
Document Preparation Fee Escrow Fee*
Document Transfer Tax ($1.10 per $1000 sales price) Notary Fees
Excise Tax (currently 1.78%) Recording charges for all documents in buyer's name
Any loan fees required by buyers lender Home inspection
Payoff of all loans in sellers name (or existing loan balance if being assumed by buyer) Tax Proration (from date of acquisition)
Interest accrued to lender being paid off Homeowners Transfer Fee
Statement Fees, Reconveyance Fees and any loan Prepayment Penalties All new loan charges (except those required by lender for seller to pay
Home Staging Interest on new loan from date of funding to 30 days prior to first payment
Home warranty (according to contract) Assumption/change of records fees for take over of existing loan
Any judgements, tax liens, etc., against the seller and Recording Charges to clear all documents of record against seller Beneficiary Statement Fee for assumption of existing loan
Tax Proration (for any unpaid taxes up to the time of title transfer) Inspection Fees (roof, property inspection, side sewer, structural, geological, etc.)
Any unpaid Homeowners Dues
Homeowners Association Document Fee Fire Insurance Premium for the first year
Any bonds or assessments (according to contract) Notary Fees
Any and all delinquent taxes Courier Fees
Courier Fees

Closing costs are the separate charges paid to different entities for the professional services associated with buying and selling of real estate.

Closing Cost Terminology

Title Insurance Premium

Fee paid by an individual to ensure he has a marketable title or to ensure its lien position.

Real Estate Commission

Fee paid to a real estate company for services of listing, showing, selling, and finalizing the transfer of property.

Transfer and Assumption Charges

Fees charged by a lender to allow a new purchaser to assume an existing loan.

Recording Fees

Fees assessed by a county recorder's office for recording the documents of a real estate transaction.

Loan Fees

Fees charged by a lender in connection with the processing of  a new loan.  These may include points, origination fee and credit report.

Escrow Fees

Fees charged by a title and/or escrow company for services to prepare documents necessary in the finalization of a real estate transaction.

Additional Settlement

Taxes, insurance, impounds, interest prorations, and termite inspection fees.

Title Insurance

How much is title insurance going to cost? Not as much you might think. Only a small percentage of closing fees are actually for title insurance protection.  Title insurance is typically less than 1% of the purchase price of your property and less than 10% of your total closing costs.

Defining Typical Closing Costs for the Buyer

Listed below are some typical closing costs you, as the buyer, may incur as part of your loan transaction. When you apply for a loan, you will receive a Good Faith Estimate of closing costs and settlement charges, along with a booklet that will explain these costs.

Appraisal

This is a one time fee that pays for an appraisal - a statement of property value for the lender. The appraisal is made by an independent fee appraiser.

Credit Report Fee:

A one time fee that covers the cost of the credit report

Loan Discount

A one time fee used to adjust the yield on the loan to what market conditions demand. It is often called "points."

PMI Premium

You might be required to pay an up front fee for mortgage insurance, depending on the amount of your down payment. Lenders may also require monies be placed into a reserve held by them.

Prepaid Interest

Depending on the time of month your loan closes, this per diem charge may vary from a full month's interest to just a few days. If your loan closes at the beginning of the month, you will probably have to pay the maximum amount, if your loan closes at the end of the month, you will only have to pay a few days interest.

Taxes and Hazard Insurance

You may be required to reimburse the seller for property taxes, prorated depending on the month in which you close. You will also need to pay a year's hazard insurance premium up front. Also, you may be required to put a certain amount for taxes and impounds into a special reserve account held by the lender.

Title Insurance Fees

There are two title policies, a lenders policy (which protects the lender against loss due to defects in the title) and a buyers' title policy (which protects you). These are both one time fees.

Escrow Fees

Fee charged by the title company to handle funds and documents of buyers and sellers.

  • Notary Fees: State established fee of $10.00 per signature
  • Recording Fees: Fee paid to county to record documents
  • Inspections Fees: Fees charged for various inspections of said property
  • Home Warranty Plan: Optional Warranty Package that pays for repair/replacement of home's major systems and appliances.
  • Disclosure Source: Optional. Consult with your realtor.