Closing Costs

Closing costs are the different fees associated with your home purchase that are paid at closing. These costs are incurred by either the buyer or seller.

Closing costs vary widely based on where you live, the property you buy, and the type of loan you choose. Here is a list of some of the different kinds of fees that might charged. You likely won't incur all or even most of these. 

  • Application Fee:This fee covers the cost for the lender to process your application. This fee can often cover the lender's cost for things like a credit check or appraisal. 

  • Appraisal: The lender will usually hire an appraiser to confirm that the loan is in line with the fair market value of the property. 

  • Closing Fee: This is paid to the title company for conducting the closing. The title company or escrow oversees the closing as an independent party in your home purchase.

  • Credit Report: A credit report is usually ordered by the lender. Your credit score plays a big role in determining the interest rate you’ll get on your loan.

  • Home Inspection: You will likely want to order a home inspection to verify the condition of a property and to check for home repairs that may be needed before closing.

  • Homeowners’ Insurance: This covers possible damages to your home. Your 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.

  • 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 your downpayment is 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 county for the recording the deed and other public records.

  • Survey Fee: This fee goes to a survey company to verify all property lines and things like shared fences on the property.  

  • Title Company 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. 

  • Taxes: This is the tax paid when the title passes from seller to buyer.

What are closing costs?