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Mortgage loan closing costs are the fees paid towards the purchase of a home. The costs associated with the closing do not all go to the lender, as many entities are involved in the home buying process. Depending on what’s customary in your area, the buyer will cover some costs, the seller will cover some costs and some of the costs are split equally. Costs will vary across states and across lenders, however, these are the most common closing fees:
Credit Report Fee ($30 to $40)
When processing your application the lender will pull your credit to determine if you will be approved for the loan.
Appraisal Fee ($300 to $500)
The appraisal of the property is to determine the fair market value of the home. The appraisal is required before a loan can be approved. A lender wants the loan amount to match the value of the home.
Loan Origination Fee ($1,000 to $1,100)
This is the fee paid to the lender for processing the loan application.
Title Insurance (Price Varies)
This fee is usually a percentage of the selling price of the home. Title insurance protects the buyer and the lender from any claims that someone other that the seller has ownership in the property.
Inspection ($40 to $50)
The buyer will typically cover the cost of the home inspection to ensure the property is in good repair. Having a home inspection protects both the buyer and seller from any unknown defects that may be discovered. It is paid prior to closing.
Homeowner’s Insurance (Price Varies)
As a condition of the loan, a lender will require the buyer to purchaser Homeowner’s insurance. It protects against damage to the home.
Recording Fee ($90 to $100)
The recording fee is paid to the government and covers the cost of officially recording the deed.
Transfer Taxes ($500 and Up)
Transfer tax is charged for passing title from one person to another. Depending upon your jurisdiction, you may be on the hook for a city, a county and a state transfer tax.
Commission (Price Varies)
The seller is responsible for paying the real estate agent’s commission fee. It is a percentage of the selling price of the home.
Home Warranty ($400 to $600)
This insurance covers heating, air conditioning, appliances, and all other household systems. It is in the seller’s best interest to pre-pay a year of Home Warranty insurance for the buyer. Once the buyer moves into the home and an unexpected repair is needed, the buyer won’t come looking for the seller to fork over the money.
Property Taxes (Price Varies)
The seller and buyer will pay the property tax in proportion to the amount of time each held ownership for the year.
Homeowner’s Association Dues (Price Varies)
HOA dues are part of the expense of living in a condominium community. The dues go towards the upkeep of the common areas in the community. Like property tax, both buyer and seller will pay in proportion to the percentage of time each held ownership during the year.
Your lender must provide you with a Good Faith Estimate that details all of your closing costs within 3 days of submitting your loan application.
