Closing costs are fees paid as part of a real estate transaction. Because a home purchase is a contract between a seller and a buyer, and the property changes hands, various costs and several people are involved.
Most homebuying situations involve four categories of closing costs:
Lender costs - With any home loan, costs are incurred by the lender to pay the processer, underwriter and closer. These costs are generally passed on to the buyer. Loan origination fees may also come into play, depending on the type of loan the buyer is securing.
Third-party expenses - Credit reports, property appraisals and inspection fees are paid to a third-party vendor for providing or performing these services.
Legal fees - Attorney's fees, title search fees, title insurance and recording fees are costs that may fall into this category.
Pre-paid expenses - Interim interest, homeowners insurance and property taxes are ongoing costs of homeownership that may be paid in advance, upfront at closing.
In some situations, it can be negotiated in the purchase contract to have the seller pay some or all of the closing costs. Your real estate agent can explain more about this process and help you negotiate, but the more you know about closing costs before you apply for your mortgage, the better! When you are ready to purchase a home, I would love to talk with you about your buying options. Give me a call today!