Closing costs occur when the title of a property is transferred from seller to buyer. These costs are integrated into the total cost of the mortgage.
Common closing costs include:
- Origination fees: The upfront fees lenders charge for processing a loan application.
- Credit report: Lenders will need to pull your credit report and may charge you a small fee.
- Title search: Examination of public records to determine and confirm legal ownership of a property.
- Homeowner’s insurance: Property insurance that covers losses and damages to the property.
- Down payment: The amount of cash you pay up front on a home when you purchase it.
- Home appraisal: A required step that helps ensure that you are paying what the property is worth.
- Home inspection: An important step to verify the condition of the property.
- Escrow fees: If your loan will be held in escrow, you may be required
This is not a comprehensive list of all closing costs and fees, as there are others based on your location, loan type, and property.
Carefully Review All Fees
Before closing on your home, review all fees and closing costs for what is known as junk fees. These are fees that are put into closing costs to inflate how much you pay, such as high administrative, mailing, or courier fees. If a fee seems unusually high, ask about it—you may be able to lower it.
Get a Good Faith Estimate from your lender, as is required to be provided to you by law. This estimate reveals all closing costs on the property.
Is There A Way To Avoid Closing Costs?
Closing costs can either be paid by the seller or the buyer of the property. You can find out if you qualify for a no-closing fee mortgage but you will be required to pay more in interest over the life of the loan.
Always consult with your lender about the best options for you when it comes to closing costs and other fees.