What Are Closing Costs?

There are lots of things that need to be taken into account when you are planning to buy or sell a property. One of those things is known as closing costs, and it’s something that first-time buyers may not be aware is required. Closing costs come from a variety of fees and often overlooked expenses. So what are these closing costs?

There are lots of factors that need to be taken into account when it comes to closing costs and can include inspections, loan fees, government recording charges, and title charges. These costs are generally covered by the buyer, although there are also instances in which the buyer can ask the seller to cover some part of the closing cost fees.

To help provide you with a clearer picture of closing costs, we will go into more detail.

Real Estate Closing Costs
pen and glasses on closing cost documents

Closing costs can change according to the area and the type of transaction performed. However, in general, the things that comprise closing costs are:

• The cost of conducting surveys
• Inspections and appraisals
• Title search fees
• Courier and Funds transfer fees
• Loan origination fee
• Assessments
• Mortgage and deed preparation costs
• Recording
• Others

Buyer’s Fees

In general, the majority of the fees included in closing costs are part of the buyer’s deal, which is why buyers generally have to take responsibility for the payment of closing costs.

Closing costs vary according to the state, type of agency, and transaction. All buyers should acquire an estimate of the closing cost fees they are liable to pay to avoid surprises at the end of the deal. Lenders are required by law to give you this, also known as a GFE (good faith estimate).

Seller’s Fees

When it comes to sellers fees, they don’t have to worry about closing costs as much as the buyer. The only thing they will be required to do is take care of the loan payoff costs, agent’s commission, associated penalties, notary fees, homeowner association fees, and transfer taxes.

Payment Options

When it comes to closing costs, the majority of the fees fall upon the buyer, and they are the ones who usually have to decide how to pay it. They can choose to pay it outright through wire transfer or with a cashier’s check. They can also choose to negotiate with the seller to cover some part of the costs in a sale. Also, some lenders offer loans with the closing costs rolled into the mortgage. This option will almost always cost the buyer more in the long run, as they will end up paying interest on these items.

A lot of first-time buyers and sellers are confused about the closing costs and the types of fees included in them. If you face any confusion, you should never hesitate to ask your mortgage broker or your agent to explain any fees to you.

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