Closing costs

    Closing Costs in Detail: What do You Pay as a Buyer or Seller?

    Closing costs are paid when a real estate deal has been finalized and is moving towards closure.  This is the time when your chosen home is transferred from the seller to you.   So how much are these closing costs and who pays them? Let’s take a look.

    What fees and charges do closing costs comprise of?

    Closing cost depend on a number of factors including the type of your purchased property, location and loan type.  Generally, they include the following fee, but confirm the same from your real estate agent.

    • Application fee – to cover the costs of application processing. Talk to your lender and find out which charges are covered; these may include the costs of appraisal, running a credit check on you and other similar expenses. Application fees can often be negotiated, and isn’t always charged by every lender
    • Appraisal fee – to pay an appraiser who then confirms the market value of the home you’re interested in
    • Attorney Fee – in some states, attorneys may be appointed to go through all closing documents, either on behalf of the lender or you as the buyer
    • Closing fee – the fees paid to a title company, an independent party that conducts closing. In some of the sates, an attorney must be present at the closing
    • Home inspection – these are paid to an inspection company who evaluates the structural condition of the home and determines the costs involved for maintenance and repairs
    • Title insurance – this insurance policy assures the lender that you own the home, protecting them in case of any title issue
    • Property tax – most of the lenders require you to pay taxes that are due in the next two months at the time of closing
    • Recording fees – the amount paid to the local recording office for all land related records
    • Transfer taxes – these are taxes paid when the title is transferred to your name

    So how much do you pay as closing costs?

    Generally, closings costs are around 2% to 5% of the selling price. If you are buying a house worth $100,000, you’ll pay around $2000 to $5000 as closing costs. Your lender will provide you an estimated loan amount that includes costs along with other components. You get this on the third working day after filing an application, but please keep in mind that these numbers are only an estimate. The actual closing costs can change later on.

    Doesn’t the seller pay anything?

    Sellers also pay some of the closing costs. The line items are limited, but they pay a bigger amount than you do. Sellers pay the real estate commission, one of the biggest components of the total closing costs. In some cases, they’ll even pay property taxes and due homeowners association fees.

    In some cases, the sellers are also willing to negotiate and may agree to pay some percentage of the total closing costs.

     

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