Understanding CLOSING COSTS Loan Origination Fee: This fee is charged by the lender for processing and underwriting the mortgage. It's typically a percentage of the loan amount. Appraisal Fee: Lenders often require an appraisal to assess the property's value. The buyer is typically responsible for covering this cost. Credit Report Fee: Lenders pull a credit report to evaluate the buyer's creditworthiness. The cost of obtaining this report is usually passed on to the buyer. Home Inspection Fee: While the home inspection itself is optional, many buyers choose to have one done. The inspection fee is paid to a professional inspector to assess the property's condition. Attorney Fees: In some states, it's customary to have an attorney involved in the closing process. Buyers may need to cover attorney fees for legal services related to the transaction. Title Search and Title Insurance: The title search ensures that the property has a clear title, and title insurance protects the buyer and lender against potential defects in the title. Both the search and insurance come with associated costs. Escrow and Prepaid Items: Buyers often need to prepay certain items, such as property taxes, homeowners insurance, and mortgage interest. These funds are placed in an escrow account to cover future payments. Recording Fees: These fees are charged by the local government for recording the property sale and updating public records. Transfer Taxes: Some areas impose transfer taxes, which are fees for transferring ownership of the property from the seller to the buyer. Survey Fee: A survey may be required to determine the property boundaries and ensure there are no encroachments. The buyer typically covers the survey fee. Courier or Wire Fees: These fees cover the cost of sending documents, particularly if funds are being wired for the transaction. Mortgage Insurance Premiums: If the down payment is less than 20%, the buyer may need to pay private mortgage insurance (PMI), and this cost is often due at closing. Reserve Funds: Some lenders may require buyers to establish reserve funds in the form of prepaid interest or additional escrow funds.
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