Mortgage Monday: Understanding Closing Costs

Closing costs are fees that are paid as part of a real estate transaction. Because buying a home is a contract between a seller and a buyer, and the property changes hands, there are various costs and several people involved.

In most cases, there are four categories of closing costs:

Lenders Costs – To obtain a home loan, there are costs incurred by the lender to pay the processer, underwriter and closer. These costs are generally passed on to the buyer. There may also be loan origination fees depending on the type of loan the buyer is getting.

Third Party Expenses – Credit reports, property appraisals, inspections, etc. 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, homeowner’s insurance and property taxes are ongoing costs of homeownership that may be paid in advance, up front 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 help you negotiate this, but the more you know about closing costs before you apply for your mortgage, the better! When you are ready to purchases a home, I would love to talk to you about your buying options. Give me a call today!

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