Closing Costs are the fees and expenses, beyond the property’s purchase price, that buyers and sellers must pay to complete a real estate transaction.
Most homebuyers encounter closing costs near the end of the purchase process, typically due on the day the transaction is finalized. These costs cover a range of services required to transfer ownership and secure financing. Common items include:
- Loan origination fees: charges from the lender for processing the mortgage
- Title insurance: protects the buyer and lender against ownership disputes
- Appraisal fee: covers the professional estimate of the home’s market value
- Prepaid expenses: often includes homeowners insurance premiums and prepaid property taxes
- Recording fees: paid to local government to register the ownership transfer
Closing costs can vary significantly depending on the loan type, lender, location, and purchase price. Buyers can generally expect costs in the range of 2 to 5 percent of the loan amount, though actual amounts may differ. Sellers may also owe certain fees at closing, such as prorated taxes or transfer charges.
Watch for: Your lender is generally required to provide a Loan Estimate shortly after application and a Closing Disclosure a few days before closing. Comparing these documents carefully can help you identify unexpected fee increases or items you may want to ask your lender to explain. HomeRule does not provide personalized financial or lending advice.
See also: Loan Estimate, Title Insurance, Escrow