Closing costs. Unless you’ve been involved in several real estate transactions, or you work in the field of real estate, you may not understand exactly what closing costs entail. You’re not alone, as these costs can be confusing to those not in the know. Here’s a crash course of these omnipresent real estate transaction fees:
To state it simply, closing costs are the additional fees associated with processing the mortgage. These fees, however, are not paid to the mortgage company. The bulk of closing costs is comprised of lender’s fees. These fees include the appraisal fee, which is an independent assessment of the value of the property being purchased, as well as the credit report and any property taxes. Lender’s fees also include mortgage and homeowner’s insurance, as well as any flood certification and pre-paid interest charges. These fees may also include origination and discount points depending on your lender, as well as loan application and loan processing fees. As a general rule, closing costs are assumed by the buyer of the property (VA mortgages are one exception to this rule) and are paid at the time of closing of escrow.
HOA transfer fees and HOA dues are typically also included within closing costs. Title fees are also part of closing costs. These fees include the title service fee, which covers the handling of title documents and funds, as well as half of the settlement and escrow fees, which cover the fees for the title search and examination. Finally, title fees also include any title insurance. Recording fees are another part of closing costs and include recording fees, transfer taxes and an affidavit of property value.
While this is by no means an exhaustive list of the transaction fees considered to be closing costs, I hope this has shed some light on this part of real estate transactions. While every transaction is different, I look forward to helping you navigate your own real estate transaction as easily and simply as possible.