Closing costs are one of the main things we hear buyers are confused about during the offer-writing process. Here’s some general info on what closing costs include so that you’ll be ready when the time comes!
What Are Closing Costs?
Closing costs are fees paid when you refinance or transfer ownership in real property. They are paid (usually) by both the buyer and the seller on the settlement date. These fees are highly variable due to many factors, including the property’s purchase price, services needed during the purchase process, utility adjustments, and local and state taxes. Generally, closing costs range anywhere from 2% to 5% of a property’s selling price. Talk to your lender before making an offer about closing cost estimates so that you can adjust your offer accordingly!
By law, lenders are required to give you a loan estimate within three days of receiving your application. This document sets out what your closing costs will be. These fees, however, are not set in stone. Your lender should provide a closing disclosure statement at least three business days before the closing date, which will be a more reliable estimate of your closing costs. Make sure you read and understand this closing disclosure and ask your lender if there are any significant changes from the initial estimate you received!
What’s Included?
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Credit report fees (the cost of checking your credit record)
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Loan origination fees (which consist of the cost to your lender for processing your loan)
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Attorney fees
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Inspection fees (for inspections requested by either you or the lender)
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Appraisal fee
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Survey fee (so that both you and the lender know where your property boundaries lie)
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Escrow deposit, which may cover private mortgage insurance and some property taxes
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Pest inspection fee
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Recording fee paid to a county or city authority to file a record of the property transfer and/or new mortgage lien against the property
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Underwriting fee to cover the cost of processing a loan application
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Discount points (money you pay your lender to get a lower interest rate)
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Title insurance (protection for you and the lender should there be any issues with the title to the property)
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Title search fees (costs incurred by the company that checks the title on the property)
