Section 10-3: Closing Costs

Closing costs are fees and expenses associated with finalizing a real estate transaction, typically paid by the buyer and sometimes the seller. These costs cover various services and processes involved in transferring ownership of the property from the seller to the buyer. Here's an overview of common closing costs:

1. Loan Origination Fees: Charged by the lender for processing and underwriting the mortgage loan.

2. Appraisal Fee: Paid to the appraiser to assess the value of the property.

3. Credit Report Fee: Covers the cost of obtaining the buyer's credit report.

4. Title Search and Title Insurance: Fees for researching the property's title history and purchasing title insurance to protect against any title defects or ownership disputes.

5. Survey Fee: Covers the cost of surveying the property to verify boundary lines and easements.

6. Attorney Fees: If an attorney is involved in the closing process, their fees may be included in the closing costs.

7. Escrow Fees: Charges for the escrow agent's services in handling funds and documents during the closing process.

8. Recording Fees: Fees charged by the local government for recording the new deed and mortgage documents in public records.

9. Prepaid Expenses: These include prepaid property taxes, homeowners insurance premiums, and mortgage interest that are due at closing.

10. Home Inspection Fees: Paid by the buyer for a professional inspection of the property to identify any potential issues or defects.

11. Title Transfer Taxes: Taxes imposed by state or local governments for transferring ownership of the property.

12. Courier Fees: Charges for courier services used to deliver documents during the closing process.

13. Homeowners Association (HOA) Fees: Prorated fees for any prepaid HOA dues or assessments.

14. Flood Certification Fee: Fee for obtaining a flood certification to determine if the property is located in a flood zone.

15. Mortgage Insurance Premiums: If the buyer is required to pay private mortgage insurance (PMI) or mortgage insurance premiums (MIP), these costs may be included in the closing costs.

It's important for buyers to review and understand the closing costs associated with their real estate transaction and budget accordingly. Closing costs can vary depending on factors such as the purchase price of the property, location, lender, and specific terms of the transaction. Buyers should receive a Loan Estimate and Closing Disclosure from the lender outlining the estimated closing costs before closing on the property.