Closing Costs Guide for Home Buyers

Here’s a helpful guide to understanding your closing costs. While we can’t tell you how much your costs will be, at least you will know what you are paying for and why.

Lender Related Fees

Many of the fees that you pay before or during closing are related to the mortgage, and required by the lender. As part of securing financing you may have agreed to pay additional fees, or “points.” Points are simply a way of saying a percentage of the load. 1 point is 1%. Overall, fees for the loan range from 3 to 6% of the total amount being loaned.

• Discount points: Money you pay up front to reduce the on-going loan rate; if agreed upon between you and the lender
• Loan origination fee: Usually 1 point (or 1%) to cover the expenses of processing the loan
• Application fee: Normally paid at the time you applied for the loan
• Appraisal fee: For an independent appraisal; may have been already paid at the time the appraisal was performed
• Credit report: About $55 for the lender to have a credit report run
• Title search and title insurance: Usually required by the lender; see our article Property Titles and Title Insurance for more details; this may sometimes be paid by the seller
• Prepaid insurance: The lender may require you to prepay the homeowners insurance.
• PMI: Mortgage insurance is required by some lenders when the down payment is minimal.
• Accrued interest: Since mortgages are paid monthly, and the closing might be in the middle of a month, some interest may accrue to make up for a partial month.

Government Fees

Fees other than lender fees are money paid to the state or county. These include:

• Fees for recording the property: Costs vary by state.
• Prepaid property taxes: Again, you may need to prepay some taxes depending on when the closing is taking place.
• Transfer taxes: Usually the state, county or city have taxes on transfer of property; may be paid by the seller

Other Fees that you may need to pay:

• Attorney’s fees
• Condo or homeowner fees
• Inspection fees: May sometimes be paid by the seller