Breakdown of closing costs for home buyers and home sellers

If you buy or sell a home, you must pay closing costs. Closing costs typically range between 2 and 6% of the home’s sale price, but vary widely depending on the sale price, location of the property, type of loan, and lender fees. The following list of fees are standard costs when buying or selling a home.

Application Fee – These are usually the only fees you pay upfront when applying for a mortgage. Typically, it covers the cost of the credit report and assessment.

Appraisal – This is paid to the appraisal company to verify the condition and fair market value of the home.

Appraisal Re-Inspection Fee – The Appraisal Fee pays a professional appraiser to visit a home, evaluate its condition and features, and provide an estimate of its market value. If repairs are mentioned, they usually need to be completed and re-inspected by the appraiser before closing.

Attorney’s fee – The fee for an attorney to review closing documents on behalf of the buyer or seller.

Closing Fee/Security Fee/Settlement Fee – This is paid to the title company, escrow company or attorney for executing the closing.

Courier/Overnight Fee – This covers the cost of transporting documents to complete the loan transaction.

Credit Report – A triple credit report is used to view your credit history and credit scores.

Discount Fees or Points – Extra fees charged to buy down interest.

Property Tax Deposit and Mortgage Insurance – Funds placed in your escrow account to ensure there is enough money available to pay future property taxes, homeowners insurance and private mortgage insurance bills.

FHA Up-Front Mortgage Insurance Premium – Applying for an FHA loan requires you to pay an upfront MIP of 1.75% of the base loan amount. These costs are usually rolled into your mortgage.

Flood Determination – This is paid to a third party to determine if the property is in a flood zone. If the property is located in a flood zone, you must purchase flood insurance.

Property Inspection – Private inspection to determine the condition of property.

Homeowners Insurance – This covers potential damage to your home. Your first year’s insurance is often paid at the time of purchase.

Home Warranty – This is a one year insurance policy on the appliances and/or electrical, heating and plumbing systems in the home.

Lender Endowment Insurance – This is insurance to assure the lender that you own the home and that the lender’s mortgage is a valid lien. It also protects the lender if there is a problem with the title.

Lead Paint Inspection – May be necessary to determine if lead paint is present in properties.

Lock-in Fee – A fee charged by the lender to protect interest during the processing and underwriting stage of the loan process.

Owner’s Policy Title Insurance – This is an insurance policy that protects you in the event that someone disputes your ownership of the home. Many credit institutions need this protection.

Origination Fee – This is a fee charged by some mortgage lenders that covers part of the lender’s fees. It is usually about 1 percent of the total loan amount, but is negotiable.

Pest Inspection – This fee covers the cost to inspect for termites.

Prepaid interest – Most lenders will ask you to prepay any interest that will accrue between closing and the date of your first mortgage payment.

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Private Mortgage Insurance (PMI) – If your down payment is less than 20% of the home purchase price, you will likely need to pay PMI.

Processing Fee – A fee to the lender used to cover overhead costs.

Property Tax – Lenders unusually require all taxes due within 60 days of the purchase to be paid at closing.

Registration Fees – A fee charged by your local county registry office for recording public land registrations.

Survey Fee – This service verifies that there are no breaches of the property you are purchasing.

Title Insurance Policy – The loan policy is usually based on the dollar amount of the loan and protects the lender’s interest in the property if a title issue arises.

Title Search – An investigation into the origin and validity of a property title.

Title Exam Fee – This fee is paid to search the property’s records. The title company examines the deed to your new home and makes sure that no one else can lay claim to the property.

Transfer Tax – This is the tax paid when the property passes from the seller to the buyer.

Underwriting Fee – This is a fee that your lender may charge to cover the cost of taking over your mortgage file.

VA Borrowing Fee – If you have a VA loan, you may be required to pay a VA financing fee at closing (or you can include this fee in the loan if you wish). This is a percentage of the loan amount that the VA assesses to fund the VA home loan program, but disabled veterans are exempt from this fee.

Most types of loans allow the seller to pay a percentage of the sale price for the buyer’s closing costs. FHA mortgages allow the seller to pay up to 6%, conventional loans allow the seller to pay between 2 and 6% of the sale price for the buyer’s closing costs, and VA loans typically allow the seller to pay all of the buyer’s closing costs.

Your mortgage lender is required to provide you with a disclosure called a “Loan Estimate,” a detailed list of the closing costs, down payment and total costs required to close your mortgage. Many of the fees listed on the loan estimate can change by up to 10% of the stated amount unless your loan program changes. If an unforeseen event occurs and the mortgage program changes to close your loan, you will receive a form called “Change of Circumstances” detailing any changes and your new charges. After you receive your final approval, your lender will email you a form called “Closing Disclosure” at least 3 days prior to your actual closing date. Upon receipt of your closing disclosure, you should compare the stated fees to your initial loan estimate and/or Disclosure of Changed Circumstances to verify that your fees have not changed more than the 10% allotted variance.