Closing Cost Breakdown for a Home Buyer

Buyers Closing CostsClosing costs are a necessary part of a real estate transaction. But these fees differ depending on which side of the table you sit. Buyers have a greater number of closing costs compared to the seller, however some of these fees are often negotiated in the real estate deal. (For instance, a seller may agree to contribute a certain amount towards the buyer’s closing costs.) Read on for a breakdown on the fees appearing on the buyer’s side of the Closing Disclosure (CD) form.

 Understanding Buyer’s Closing Costs

According to Realtor.com, closing costs are usually between 2% and 7% of the amount of the home. These costs also vary based on the type of mortgage you choose or for which you qualify.

Buyer’s closing costs typically include the following items:

  • Loan Application: Amount varies per lender, and covers the administrative cost of processing your loan application.
  • Home Appraisal: Applies to every real estate transaction involving a lender, and provides an objective estimate of the fair market value of the home.
  • Land Survey: Optional – only ordered upon request by a buyer or agent. Describes the boundaries and other pertinent details of the property.
  • Credit Report Review: Charged by the lender to ensure good credit status.
  • Flood Determination: Performed by the lender to determine if the property falls within a flood zone.
  • Flood Elevation Certificate: May be required if it’s determined that the property is, in fact, located within a flood zone.
  • Attorney Fee: Applies only if you hire an attorney versus a settlement company to handle your closing.
  • Homeowner’s Insurance: Applies to every transaction with a lender.
  • Flood Insurance: Often required if the property is located within a high risk flood zone.
  • HOA Assessment: Charged if the property is part of a homeowners’ association, and is typically prorated.
  • Prepaid Interest (Loan Discount Points): The amount of interest that accrues between your closing date and the first loan payment. Loan discount points reduce the interest rate on your mortgage. 
  • Private Mortgage Insurance (PMI): Typically required if the down payment is less than 20 percent. Certain mortgage products require PMI for the life of the loan.
  • Lender’s Title Insurance: Protects the lender’s interest if title problems arise surrounding the property.
  • Origination Fee: Charged by the lender, and covers the cost of creating the home loan.
  • Courier Fee: Amount charged by some lenders for document delivery throughout the real estate transaction.
  • Recording Fee: Varies by city or county, and charged for public recording of the real estate sale.
  • Transfer Taxes: Charged by the city, state or county to cover the cost of transferring title on a property.
  • Underwriting Fees: Amount charged by the lender to evaluate in depth your ability to repay the home loan for which you’ve applied.
  • Title Company Closing Fee: Amount charged by the title company to conduct the real estate transaction.

*Some types of mortgages may include fees specific to those products. Closing fees and their amounts may vary per state and/or municipality.

Have questions on how closing costs are determined, or about the settlement process in general? We’re happy to help! Call Linear Title & Escrow at (757) 340-0340 today.

 

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