Fees Included in Typical Home Closing Costs
There are numerous individual fees that are compiled into your closing costs. Below we have briefly explained only the most common fees you can expect to find when reviewing your closing costs. The state you live in can drastically affect the fees you pay, as well as how much those fees are. So make sure to consult with your real estate agent, and ensure you are prepared for all the closing costs that are required of your specific transaction.
Mortgage Origination Fees
Loan origination fees are charged by your bank in order to create your loan. These fees may be negotiable though depending on the risk level of the loan, and your credit score. In some cases this fee may not be charged at all depending on your bank. It also has the possibility to be negotiated away depending on your specific situation.
Appraisal Fees
An appraisal fee is the price you pay in order for an appraiser to verify the value of the property you wish to buy. Many lenders require a professional appraiser to assess any property they are lending for. Even if your lender doesn’t though, it is a good idea to invest in one. Utilizing this service ensures that you are getting a fair market price for the property you intend to buy.
Title Insurance
Title insurance protects you against losses resulting from defects in the title due to the previous owners. Defects would include liens, outstanding taxes, mortgage payments, or any other violations. Paying for this insurance is typically required by all lenders. On the bright side: it is only a one time payment.
Real Estate Agent Fees
Assuming the seller used a listing agent to sell their home, the agent fees are usually the responsibility of the seller. This is not true for all cases though, remember everything is up for negotiation. Nevertheless, generally agent commission fees will fall between 2% and 6% of the property’s final sale price, and the seller can expect to pay that bill at closing.
Prepaid Costs
Prepaid costs are required by your lender, and are paid in advance when getting a loan. These costs can vary, but typically they include things like property taxes, or homeowners insurance. All the costs falling under this category should be explicitly listed out in your loan estimate and closing disclosure.
Private Mortgage Insurance
Private Mortgage Insurance is applied to any home purchase using a conventional loan with a down payment less than 20%. This insurance protects the lender from losing any money if you end up in foreclosure. The cost of this insurance depends on how much you were able to put down, and your credit score.
Recording Fees and Taxes
Local and state governments charge different fees and taxes to record and recognize your transaction. For example, New York charges $2 for every $500 in value of your property.
