What’s Included in ‘Closing Costs’?
Closing costs can vary widely, and what’s included will depend on many factors—primarily where you’re buying a home, and the kind of property you’ve chosen. The following is a list of fees commonly incorporated into closing costs:
- Credit report fee: running your credit check
- Loan origination fee: locating funds for your mortgage
- Attorney’s fees
- Appraisal, survey and inspection fees: including those required by the lender and requested by you
- Discount points: relating to a refinanced loan
- Title fees: including insurance, to protect the lender in the event the title is unclean, and background checks
- Recording fees: recording the new property records with the city and county
- Underwriting fee: covering the cost of evaluating the mortgage application
How Much Are They?
Generally, people should expect closing costs to be around 2-5% of the purchase price of the home, and a recent survey found that $3,700 was the average amount for closing fees. Your lender is required to give you a Good Faith Estimate (GFE) within three days of your loan application, though each of the fees listed there can legally increase by as much as 10%. GFEs often reveal the general amount you should expect to pay, but realize too they can increase to a somewhat substantial degree.
Who Has to Pay Them?
Almost always, the buyer of a home will pay the closing costs, though when you’re negotiating on a price, sometimes the seller will offer to pay them. Additionally, some lenders will offer a no-closing mortgage, in which they cover the expenses. If you’re strapped for cash up front, this can be a good option, but it often costs more in the end, with either higher interest rates or the closing costs increased and included in the principal of the loan.
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