What Are Closing Costs?
Closing costs are one of the less-discussed parts of real estate transactions, but these mandatory fees can add up if you don’t have the right expectations. Here are the basics of what you need to know about estimating closing costs when you’re purchasing a home.
These fees are all associated with a home purchase, and they are paid at closing for any real estate transaction. Closings costs can be incurred and paid by the buyer or the seller.
Every home that is purchased will have a different amount of closing fees depending on property value, location and a variety of other factors.
What Fees Can Be Included in Closing Costs?
- Lender application fee
- Appraisal cost (paid to the appraisal company)
- Attorney fees (on behalf of lender or buyer)
- Closing fees or escrow fees
- Courier fees (if documents were transported during any step of the process)
- Credit reporting fees
- Escrow deposits for property taxes and/or mortgage insurance
- Home inspection costs
- Home Owners Association (HOA) transfer fees
- Homeowners’ insurance (typically the first year of costs is paid up-front at closing)
- Title insurance
- Lead-based paint inspection
- Origination fees (about 1% of a loan’s cost to cover administrative expenses for the lender)
- Prepaid interest
- Property taxes
- Recording fees (charged by a city or county recording office)
- Transfer taxes
- Underwriting fees
How Much Do Closing Costs Cost?
On average, homebuyers pay 2-5% of the purchase price of the property in closing costs. For example, if you are purchasing a home that is $150,000, you could expect to pay $3,000-$7,500 in closing costs.
Remember that fees are unique to the home you are purchasing and the costs accrued by both buyer and seller. Since the real estate market is currently a seller’s market, buyers should be prepared to cover all of the closing costs to sign on the dotted line.
If you want to avoid paying some closing costs, you can obtain a no-closing-cost mortgage, where the fees are often paid over the long run in the form of a higher interest rate or a higher loan amount.
Partner with Equity Mortgage for Help with Your Closing Costs
We are experienced in getting homeowners the best possible mortgage product for their situation. Since every client is in a different situation, we encourage you to get in touch and learn how we can help. Contact us today by calling 443-471-4310. We look forward to hearing from you!