Closing costs are all of the fees and expenses associated with the closing or settlement of a real estate transaction. Here's what you need to know about the closing costs you may have to pay when you buy your next home:
Buyer's closing costs
Closing costs for homebuyers aren't cheap — typically ranging from 2% to 5% of the sale price. In other words, if you buy a $200,000 house, you can expect closing costs of between $4,000 and $10,000.
As a buyer, your closing costs may include, but are not limited to:
Attorney fees — real estate closings may involve an attorney for the buyer, seller, or both.
Credit report fees — to qualify for a mortgage, your lender will check your credit and may pass this expense on to you.
Loan origination fees — this is a fee your lender charges for processing your loan's paperwork.
Inspection fees — many lenders require home inspections before a mortgage can be approved.
Discount points — lenders charge this initial (and optional) fee in exchange for a lower interest rate for the life of the loan.
Appraisal fees — an appraisal is required to verify that the sale price of the property is justified.
Survey fees — either party can pay these fees to confirm the size and dimensions of the land.
Lender's title insurance — sellers pay the majority of title insurance costs, but the policy that protects the lender is typically the buyer's responsibility.
Title search fees — a background check on the title is run to search for unpaid liens on the property.
Escrow deposits — your lender will probably require you to pre-pay a few months of taxes and insurance to form a "cushion" in your loan's escrow account.
Recording fees — these are paid to your city or county for recording your purchase.
Underwriting fees — these are the cost of evaluating your loan application.
It's important to note that these fees, as well as the buyer's responsibility to pay them, can vary widely based on your location. If you want an estimate for your situation, many lenders provides a useful calculator that can help you estimate your closing costs based on location, down payment, and loan type.