Real Estate Closing Costs
Simply put, closing costs are the charges and fees paid when a home purchase is finalized. Both buyers and sellers are typically responsible for paying closing costs to the various service providers who contribute to the transaction, including agents, attorneys, the title company and more.
For buyers, closing costs typically average between 2 and 5 percent of the total purchase price. For example, if the home is selling for $300,000, you may pay between $6,000 to $15,000 in closing costs. But don’t worry — the exact figure will typically be estimated and shared with you within a few days of submitting your loan application. You will also receive a closing disclosure with the final figure before your closing date.
Closing costs may include:
- mortgage insurance
- title company fees
- lender fees
- appraisal fees,
- loan origination fees
- credit report charges and more.
The seller typically covers ownership transfer fees and a commission for their real estate agent. However, closing costs do vary depending on each scenario so you may want to ask these questions in the initial stages of the home buying process to help you better determine a budget.
Overall, the costs can usually be divided into two main categories:
- Fees associated with buying a home and taking out a loan and
- Costs associated with owning a home. The latter category, also known as prepaid costs, may cover fees that recur over time, including property taxes, homeowner’s insurance, and in some cases, homeowner’s association dues.
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