What Are Closing Costs?
After you find your dream home, get an offer accepted, and your loan approved, there is one more step called the closing. This is when the seller transfers ownership of the property to the buyer. During closing, the buyer will sign many documents and pay for the down payment and various closing costs.
Some common closing fees include:
- Appraisal Fee: pays for the appraisal of the property
- Credit Report Fee: covers the cost of the credit report
- Loan Origination Fee: covers the lender's loan-processing costs
- Loan Discount: a one-time charge if you pay points to lower your interest rate
- Title Insurance Fees: covers title search, examination, insurance, and document preparation
- PMI Premium: a fee for mortgage insurance if you have a low down payment
- Prepaid Interest Fee: covers the interest payment from the date of purchase to the first mortgage payment
- Escrow Accounts: holds funds for property taxes and home insurance
- Recording Fees and Transfer Taxes: charged by most states for recording purchase documents and transferring ownership.