Decoding Closing Costs

Written by Posted On Wednesday, 13 July 2016 11:47

Purchasing a mortgage, especially for the first-time homebuyer, can seem like a complicated business. In reality, the borrowing process is pretty straightforward, but buyers should educate themselves at the outset of the home buying experience so they are certain that they understand all of the fine print.


One aspect of home financing that some buyers can find confusing or cumbersome is the notion of closing costs. While most people have heard the term, not everyone fully understands all the fees and payments entailed under the umbrella of closing costs. It's important to know exactly what these costs will look like, and to allocate funds to cover them so that the buyer isn't caught unaware and unprepared at the close of sale.


The closing of a home purchase is the point at which the real estate contract is executed and the buyer receives the property title. There are expenses associated with this transaction that are owed by the seller, the buyer, or both parties. Every closing is different, but here are a few of the fees that may be expected at closing; not all will be relevant to every sale depending on how financing is structured:


 The Mortgage Application Fee. While some lenders expect this money up front at the time the lending process is initiated, some prefer to roll it into closing costs.


 Credit Report. Again, some lenders expect payment for a credit standing check at the beginning of the lending process, while others will include it in closing costs.


 Lender Fees. Any fees the lender charges for underwriting and processing may be expected at closing if they haven't been otherwise accounted for.


 Appraisal and Inspection Reports. Most lenders require that the buyer pay for both a property appraisal (to verify the property's value in comparison to its price) and a home inspection (to make sure there isn't some problem with the home that could alter its value – not to mention habitability).


 Title Exam and Title Insurance. A thorough investigation of property records in necessary in order to ensure that there are no outstanding liens or claims against the property that could call the legality of the sale into question. This is the title examination. Title insurance guarantees that the property title is valid and that the new owner won't be responsible for any claims leveraged against it.


 Brokerage Commissions. These fees are usually the responsibility of the seller, and are paid to the real estate brokerage in exchange for marketing the property and negotiating the sale.


 Attorneys' Fees, Closing Fees, and Escrow Fees. These are fees associated with document preparation and depending on the terms of the sale, they can be paid by either the seller or the buyer or shared by both parties.


 Recording Fees. Also paid by either party, recording fees are incurred when the land records agency or municipality creates an official record of the property sale.


 Wire Transfer Fees and Courier Fees. These costs pay for the transportation of documents when necessary.


 Document stamps and Transaction Taxes. This excise tax is required by law and may be paid by the seller or the buyer depending on where the transaction is executed.


 Discount Points or "Points." Points, or pre-paid interest, are purchased in exchange for a lower mortgage interest rate. One point equals one percent of the loan principal. Points are purchased in order to lower monthly payments for the life of the loan. Buyers may purchase different numbers of points or no points at all depending on their specific financing arrangement.


It's important to remember that no two home sales are alike, and closing costs can vary by location, by situation, and in terms of which party is responsible for payment. Not every home sale will involve all of the above closing costs, and some sales may include additional costs at close. To stay informed about the particulars of your closing costs, keep in close contact with your loan officer and make sure to ask questions about any aspect of the closing that you don't full comprehend. Your loan officer will be happy to ensure that you have a clear understanding of all of your financial obligations before your home sale becomes final.


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Poli Mortgage Group

About Poli Mortgage Group, Inc: Poli Mortgage Group, Inc. is a privately held business founded by Edmund "Chip" and Chris Poli in 2001.  Poli Mortgage, with its direct lending power, numerous banking and industry partners, highly secure internal platform & process, and best in class Customer Service, is committed to providing a vast range of customized mortgage programs to satisfy any borrower’s financial requirements. Since inception we are over 40,000 transactions and 11 Billion dollars in transactions. Program offerings include FHA, VA, USDA, FNMA, FHLMC, ARM, debt consolidation, home improvement, and other niche & jumbo loans.  For more information please visit

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