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Closing costs are the fees that buyers and sellers pay to complete a real estate transaction. They typically range from 2% to 6% of the purchase price of the home, and they can vary depending on the location of the property, the type of loan, and other factors.
HERE ARE SOME OF THE MOST COMMON CLOSING COSTS
1. Origination fee: This is a fee charged by the lender for processing the loan application or to be more clear an origination fee is what the lender charges the borrower for making the mortgage loan. The origination fee may include processing the application, underwriting and funding the loan, and other administrative services.
2. Appraisal fee: This is a fee paid to have the home appraised to determine its value. In other words an appraisal fee covers the cost to have an appraiser estimate a home's market value. The fee is usually paid by the buyer unless they negotiate for the seller to pay it. Although it's usually the lender that requires an appraisal, the process also benefits buyers and sellers.
3. Title insurance: This insurance protects the buyer and lender from any liens or defects on the
title of the home. To put it simply, title insurance is a way to protect yourself from financial loss and related legal expenses in the event there is a defect in title to your property that is covered by the policy. Title insurance differs from other types of insurance in that it focuses on risk prevention, rather than risk assumption.
4. Recording fees: These are fees paid to the county to record the transfer of ownership of the home.The term recording fee refers to an expense charged by a government agency for registering or recording the purchase or sale of a piece of real estate. The transaction is recorded so it becomes a matter of public record.
5. Transfer taxes: These are taxes paid to the state or local government when the home is sold. A transfer tax is a charge levied on the transfer of ownership or title to property from one individual or entity to another. A transfer tax may be imposed by a state, county, or municipality.
IN ADDITION TO THESE COMMON CLOSING COSTS, THERE MAY BE OTHER FEES ASSOCIATED WITH THE TRANSACTION, SUCH AS
1. Attorney's fees: If you hire an attorney to help you with the closing process, you will need to pay their fees.
2. Inspection fees: You may need to pay for a home inspection, pest inspection, or other inspections before the closing.
3. Prepaid expenses: You may be required to prepay certain expenses, such as property taxes and homeowners insurance.
HOW TO SAVE ON CLOSING COSTS
1. Shop around for lenders. Different lenders charge different fees, so it's important to shop around to find the best deal.
