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All About Closing CostsYou're almost there: the last phase of the journey to owning your new home. Last destination—closing costs.

In addition to paying the purchase price on your new home, as a home buyer you'll also be responsible for the closing costs required to complete the final transaction. Don't let these costs sneak up on you -- be prepared to have access to the necessary funds while searching for your new home.

What Are They

Closing costs are costs not reflected in the actual price of the property. They are fees and expenses that are paid when property ownership is transferred. These fees typically run up to 2 to 5 percent of the purchase price of the home.

While every home-buying experience is different, here's a list of the most common fees and expenses required for closing the transaction:

  • Title Insurance – Often required to protect against hidden title problems, such as errors and omissions with deeds, oversights when examining records, forgery and undisclosed heirs.

  • Title Search – An examination of municipal or county records to determine the legal ownership of real estate, usually performed by a title company or attorney.

  • Attorney Fees/Settlement Fee – Fees paid to the attorney and/or closing company who prepares and reviews all of the closing documents on your behalf.

  • Escrow Fees – Covers the cost of setting up an account with your lender to collect your local taxes and/or homeowners insurance on a monthly basis.

  • Courier Fees – Covers the cost of transporting documents to complete the loan transaction.

  • Appraisal Fees – Appraisal company’s fee to confirm the fair market value of the home.

  • Loan Discount Points – Also known as “points.” Each point equals 1 percent of the mortgage amount and represents the equivalent of prepaid interest and is used to lower interest rates on a loan.

  • Loan Origination Fees – Fees charged by lender to offset cost of originating your loan.

  • Wire Fees – Wire transfer fee.

  • Underwriting Fees – These fees go to your lender and cover the cost of researching whether or not you should be approved for the loan.

  • Recording Fees – Charged by your local city or county recording office for the recording of public land records.

  • Transfer Tax – Collected by state or local government agencies.

  • Document Preparation Fees – Processing fee, charged for preparing the document needed for closings.

  • Credit Check Fees – Credit report fees (or mortgage credit report fee) which is more extensive than a typical credit report.

  • Survey Fee – Paid to survey company to verify all property boundaries.

  • Tax Service Fee – A fee to verify to the lender that taxes have actually been paid when due.

  • Homeowner’s Hazard Insurance – You’ll be required to have a policy in effect at closing with the first year’s premium paid in full. This insurance is protection against physical damage to the house by fire, wind, vandalism, and other causes.

  • Flood Zone Determination Fee - A fee to determine if your property is within a flood zone.

  • Flood Insurance - A federally regulated financial instrument that protects real property owners from water damage to the structure and/or contents of their property. 

Your lender will provide you with a good faith estimate of your fees prior to settlement tp help prepare you for your closing costs. Your closing agent or attorney will most likely ask you to bring with a cashier's check representing the balance needed to cover the down payment and closing cost.

Once you’ve signed all the papers and presented your check, the keys to your new home will be yours. The journey to home ownership is an exciting experience. For now, breathe a sigh of relief, celebrate your achievement and enjoy making your new home a reality.