Before the real estate closing date, your lender will provide you with a closing disclosure, which provides an itemized list of fees and outlines who is responsible for paying them. Occasionally, motivated sellers will pay all or a portion of closing costs to assist the buyer. Here are some of the most common fees included in closing costs:
- Application Fee: This is the fee that many lenders charge to process your mortgage application. It may include a fee for the lender to obtain your credit report.
- Title Insurance: This insurance protects the homeowner and the lender in case someone challenges your ownership of the home.
- Notary Fee: This covers the cost of a notary witnessing and certifying the signatures on all the closing documents.
- Wire Fees: Any bank wire transfers (such as wiring the down payment to the lender) may incur a fee.
- Courier or Delivery Fee: This covers the cost of transporting your documents via a courier service so that the mortgage loan can be processed in a timely manner.
- Attorney Fee: In some states, an attorney must review all the closing documents before the real estate transaction can be completed.
- Mortgage Points (also known as Discount Points): This is an optional fee that some buyers pay to the lender in exchange for a reduced interest rate on the loan (one point costs 1% of the loan amount).
- Recording Fee: This fee is paid to your city or county recording clerk's office for documenting the new owner of the property.
- State, County, or City Transfer Taxes: In some locales, a tax is collected when property changes ownership. The amount is set by the state or local government.
- Hazard Report: Some states require that you obtain a disclosure or report from a third party to determine if the property falls in a hazard zone, such as a flood zone, earthquake area, or wildfire risk zone.
- Home Inspection or Appraisal: If the buyer doesn't pay for these items at the time the service takes place, they may be rolled into the closing costs.
Some government-sponsored loans offer reduced closing costs or allow you to roll your closing costs into the loan. Be sure to talk with your lender if you have any questions about closing costs.
In addition to one-time closing fees, you may have to prepay some other costs at closing, such as your homeowner's insurance, county property tax, or fire/flood insurance. These fees may be placed in an escrow account.