Closing costs are the fees and charges that buyers and sellers incur to complete a real estate transaction. These costs are in addition to the purchase price of the property and are paid at the closing of the transaction. Closing costs can vary depending on factors such as the location of the property, the type of loan, and the specific terms of the transaction.
Typical Closing Costs
Typical closing costs can include the following:
Origination and underwriting fees: These fees are charged by the mortgage lender for processing and approving the loan application.
Real estate commissions: These fees are paid to the real estate agents involved in the transaction.
Taxes: Closing costs may include property taxes that need to be paid at the time of closing.
Insurance premiums: This can include homeowner’s insurance and mortgage insurance.
Title and record filings: These fees are associated with the transfer of ownership and the recording of the new deed.
Attorney fees: If you have a real estate attorney representing you, their fees may be included in the closing costs.
Appraisal fees: These fees cover the cost of assessing the value of the property.
Credit report charges: Lenders may charge a fee for pulling your credit report.
Other miscellaneous fees: There may be additional fees for services such as a home inspection or survey.
It’s important to note that closing costs can vary depending on the specific transaction and location. Buyers and sellers should review the Closing Disclosure document provided by the lender, which outlines the estimated closing costs, to understand the specific costs associated with their transaction .
Who Pays Closing Costs?
In most cases, the majority of the closing costs are paid by the buyer. However, the seller may also be responsible for certain closing costs, such as the real estate agent’s commission and the real estate transfer tax. Buyers can also negotiate with the seller to cover some of their closing costs, which is known as a seller concession. The ability to negotiate seller concessions may depend on market conditions and the specific circumstances of the transaction .
Estimating Closing Costs
Closing costs can vary depending on factors such as the purchase price of the property, the loan amount, and the location. Buyers can use closing cost calculators provided by lenders or other online resources to estimate their potential closing costs. On average, closing costs can range from 2% to 5% of the property’s purchase price, but they can be higher in some cases .