Closing costs consist of costs that have been incurred throughout the home buying process. These fees vary from inspection fees, to loan origination fees. Depending on where you live, the type of home loan you have, and your lender, these fees vary greatly. Per Zillow, here are some fees that you will see associated with the purchase of your home.
Application Fee: Cost to apply for a loan. In some cases, this includes costs associated with a credit check and verification.
Appraisal: Cost to get home appraised to confirm the fair market value and is close to the listing price.
Attorney Fee: All associated attorney’s fees to review legal documents and agreements in the transaction.
Closing Fee or Escrow Fee: Cost associated with the use of an escrow account by the third-party escrow company. This also includes costs associated with the actual closing of the transaction such as the closing coordinator and broker’s fees.
Courier Fee: This covers the cost of transporting documents to complete the loan transaction as quickly as possible.
Credit Report: A Tri-merge credit report is pulled to get your credit history and score. Your credit score plays a big role in determining the interest rate you’ll get on your loan.
Escrow Deposit for Property Taxes & Mortgage Insurance: Lenders often require homebuyers to pay two months of property tax and mortgage insurance payments at closing. This is deposited into an escrow account.
Flood Determination: Cost to determine whether the home you are buying is in a flood zone. If the home is in a flood zone, you’ll have to pay flood insurance.
Home Inspection: Lenders require a home inspection to verify the state of the property is feasible for investment by the lender.
Homeowners’ Insurance: This insures your home against damages. First year’s insurance is often paid at closing.
Lender’s Policy Title Insurance: This is insurance to assure the lender that you own the home and the lender’s mortgage is a valid lien, and it protects the lender if there is a problem with the title. Similar to the title search, but always a separate line item.
Lead-Based Paint Inspection: Covers the cost of evaluating lead-based paint risk.
Loan Discount Points: “Points” are prepaid interest. One point is one percent of your loan amount. This is a lump sum payment that lowers your monthly payment for the life of your loan.
Owner’s Policy Title Insurance: This is an insurance policy that protects you in the event someone challenges your ownership of the home. It is usually optional.
Origination Fee: This covers the lender’s administrative costs. It’s usually about 1 percent of the total loan but you can sometimes find mortgages with no origination fee.
Pest Inspection: This fee covers the cost to inspect for termites or dry rot, which is required in some states and required for government loans. Repairs can get expensive if evidence of termites, dry rot or other wood damage is found.
Prepaid Interest: Most lenders will ask you to prepay any interest that will accrue between closing and the date of your first mortgage payment.
Private Mortgage Insurance (PMI): If you’re making a down payment that’s less than 20% of the home’s purchase price, chances are you’ll be required to pay PMI. If so, you may need to pay the first month’s PMI payment at closing.
Property Tax: Typically, lenders will want any taxes due within 60 days of purchase by the loan servicer to be paid at closing.
Recording Fees: A fee charged by your local recording office, usually city or county, for the recording of public land records.
Survey Fee: This fee goes to a survey company to verify all property lines and things like shared fences on the property. This is not required in all states.
Title Company Title Search or Exam Fee: This fee is paid to the title company for doing a thorough search of the property’s records. The title company researches the deed to your new home, ensuring that no one else has a claim to the property.
Transfer Taxes: This is the tax paid when the title passes from seller to buyer.
Underwriting Fee: This also goes to your lender, covering the cost of researching whether or not to approve you for the loan.
So how much does all of this actually cost? On average, a buyer can expect closing costs to sum around 2% and 5% of the home price. So, if your home is $450,000 have at least $9,000 set aside for closing.