Closing costs are fees and expenses associated with the purchase or refinancing of a home that are paid at the closing of the real estate transaction. These costs are in addition to the purchase price of the home and can vary depending on a number of factors, including the location of the property and the type of mortgage you are getting.
Common closing costs include:
- Loan origination fees: This fee covers the lender’s administrative costs associated with processing your loan application.
- Appraisal fees: This fee covers the cost of having a professional appraiser evaluate the value of the property.
- Title search and insurance: This fee covers the cost of a title search to ensure that there are no liens or other issues with the property’s title, and the cost of purchasing title insurance to protect against any future title issues.
- Home inspection fees: This fee covers the cost of having a professional home inspector evaluate the condition of the property.
- Escrow fees: This fee covers the cost of establishing an escrow account to hold funds for property taxes and insurance.
- Prepaid interest: This fee covers the interest on your mortgage that accrues between the closing date and the end of the month.
- Property taxes: Depending on the timing of your closing, you may be required to pay prorated property taxes at closing.
Closing costs can add up to several thousand dollars, so it’s important to budget for these expenses when you are planning to purchase or refinance a home. Your lender or real estate agent can provide you with an estimate of the closing costs you can expect to pay based on your specific situation.