Closing Cost Breakdown for Home Buyers and Sellers

If you are buying or selling a home, you will have to pay closing costs. Closing cost typically ranges from 2-6% of the home’s sales price, but varies greatly depending on the sale price, the location of the property, the type of loan, and lender fees. The following list of fees are standard costs associated with buying or selling a home.

Application Fee – This is usually the only fee you will pay upfront when applying for a mortgage. It usually covers the cost of the credit report fee and appraisal.

Appraisal – An appraisal company is paid to verify the condition and fair market value of the home.

Appraisal Re-inspection Fee – The Appraisal Fee pays a professional appraiser to visit a home, evaluate the condition and features, and provide an estimate of market value. If repairs are cited, they will usually need to be completed and re-inspected by the appraiser prior to closing.

Attorney Fee – The fee for an attorney to review the closing documents on behalf of the buyer or seller.

Closing Fee/Escrow Fee/Settlement Fee – Paid to title company, escrow company or attorney for closing.

Courier/Overnight Fee: Covers the cost of transporting documents to complete the loan transaction.

Credit Report: A triple combination credit report is used to review your credit history and credit scores.

Discount Fees or Points – Additional costs charged to buy the interest rate down.

Property Tax and Mortgage Insurance Escrow: Funds placed in your escrow account to ensure that sufficient funds are available to pay future property taxes, homeowners insurance, and private mortgage insurance bills.

FHA Initial Mortgage Insurance Premium – If you are applying for an FHA loan, you will need to pay the initial MIP of 1.75% of the base loan amount. This expense is generally included in your mortgage.

Flood Determination – A third party is paid to determine if the property is located in a flood zone. If the property is determined to be located within a flood zone, you will need to purchase flood insurance.

Home Inspection – Private inspection to determine the condition of the property.

Homeowners Insurance – Covers potential damage to your home. Your first year’s insurance is often paid at closing.

Home Warranty: This is a one-year insurance policy for your home’s appliances and/or electrical, heating, and plumbing systems.

Lender’s Policy Title Insurance – This is insurance to assure the lender that you own the home and that the lender’s mortgage is a valid lien. It also protects the lender if there is a problem with the title.

Lead-Based Paint Inspection: May be required to determine if lead-based paint is present on the property.

Fixed Fee – A fee charged by the lender to protect the interest rate during the loan underwriting and processing phase.

Owner’s Policy Title Insurance – This is an insurance policy that protects you in the event someone challenges your ownership of the home. Many credit institutions require this protection.

Origination Fee – This is a fee charged by some mortgage lenders and covers part of the lender’s costs. It’s usually around 1 percent of the total loan amount, but it’s negotiable.

Pest Inspection – This fee covers the cost of the termite inspection.

Prepaid Interest – Most lenders will require you to prepay any interest that accrues between closing and the date of your first mortgage payment.

Private Mortgage Insurance (PMI): If your down payment is less than 20% of the home’s purchase price, you may have to pay PMI.

Processing Fee – A fee from the lender used to cover overhead costs.

Property Tax: Lenders generally require taxes due within 60 days of purchase to be paid at closing.

Recording Fees – A fee charged by your local county recorder’s office for the registration of public land records.

Inspection Fee – This service checks the property you are buying for trespassing.

Title Insurance Policy – ​​The loan policy is usually based on the dollar amount of the loan and protects the lender’s interest in the property in the event of a title problem.

Title Search: An investigation into the origin and validity of a title to property.

Title Examination Fee – This fee is paid to search property records. The title company investigates the deed to your new home, making sure no one else has a right to claim the property.

Transfer taxes: This is the tax that is paid when the title is transferred from the seller to the buyer.
Underwriting Fee – This is a fee your lender may charge to cover the cost of underwriting your mortgage file.

VA Financing Fee – If you have a VA loan, you may be required to pay a VA financing fee at closing (or you can carry this fee over to the loan if you prefer). This is a percentage of the loan amount that VA assesses to finance the VA home loan program; however, disabled veterans are exempt from this fee.

Most types of loans allow the seller to pay a percentage of the sales price toward the buyer’s closing costs. FHA mortgages allow the seller to pay up to 6%, conventional loans allow the seller to pay 2-6% of the sales price for buyers’ closing costs, and for VA loans, the Seller can usually pay all buyers closing costs. .

Your mortgage lender must provide you with a disclosure called a “Loan Estimate,” which is an itemized list of closing costs, a down payment, and the total costs needed to close your mortgage. Many of the fees listed in the loan estimate can change by up to 10% of the listed amount, unless your loan schedule changes. If an unforeseen event occurs and the mortgage program changes to close your loan, you should receive a “Changed Circumstances” form that provides an itemized list of any changes and discloses your new rates. After receiving your final approval, your lender will email you a form called a “Closing Disclosure” at least 3 days before your actual closing date. After receiving your Closing Disclosure, you should compare the rates listed with your Initial Loan Estimate and/or Changed Circumstances Disclosure to verify that your rates have not changed by more than the 10% allotted variance.