Closing costs are fees charged by title companies, banks, lenders, etc. that are associated with the purchase of a home. Items such as loan origination fees,discount points, appraisal, survey, underwriting fees, title search fees, title insurance. These fees typically range from 2 1/2 – 4% of the selling price of the property.

I recommend getting an estimate of closing costs from 2 or 3 lenders so you know costs prior to making an offer.

Here is a Breakdown of Closing Cost associated with A Home Purchase

LENDER’S FEES

• Loan Origination fee - A fee charged by lenders to procure your mortgage loan. The industry standard is 1% of the loan amount; however, because this fee is set by the lender, it can vary.

• Discount Points - A fee charged to buy down the interest rate.

• Appraisal fee - An independent written opinion that identifies the property’s market value. This document is The fee can vary widely depending on the type and location of the property. For homes located in urban areas, this fee usually runs $250.00 - $350.00.

• Credit Report - A document summarizing the applicant’s history of repaying debts. Credit reports usually cost $11.00 to $60.00, depending on the source.

• Mortgage Broker fees – Fees paid to individuals who produce mortgage loans for lenders.

• Tax related service fee - A fee required by lenders to cover the cost of annually researching tax records to insure that the borrower is current on their property tax payments.

• Application Fee – A one-time fee to process your mortgage loan application.

• Underwriting fee – A fee charged by many lenders to review and approve the mortgage application.

ITEMS REQUIRED BY LeNDERS TO BE PAID IN ADVANCE

• Pre-paid interest - Daily interest paid from the day your loan closes and you take possession of the home until the end of the month.

• Private Mortgage Insurance (PMI) - If your loan is more than 80% of the value of the property, lenders require this insurance premium.This premium is paid monthly into your escrow account.

TITLE CHARGES

• Escrow fee, document preparation fee - These are fees collected by the Title Company or attorney handling the closing. The funds are collected and paid as part of the transaction.

• Notary fees – A fee charged for having the signatures on all legal documents of the sale notarized.

• Attorney fees or Closing fees - Fees paid to an attorney or title insurance company to prepare the closing documents.   

• Title insurance - Provides insurance to owners of real estate to insure that they have clear title to the property they are buying, subject to any exceptions contained in the policy. Most lenders would never originate a mortgage without title insurance. The charge for title insurance is generally determined by each state’s Department of Insurance.

GOVERNMENT RECORDING AND TRANSFER FEES

• Recording fees - Fee charged by the county to record the Mortgage/Deed of Trust or any other legal documents in the real estate loan transaction.

ADDITIONAL SETTLEMENT CHARGES

• Pest inspection - Required for an FHA loan by the government or possibly by the underwriter/investor as a condition of the loan.

• Survey - Document outlining the exact dimensions of the property. Usually required for a purchase or anytime improvements (e.g. deck, fence, pool, etc.) have been done since the last survey.