Closing costs of a home are costs paid by buyers and sellers during the home buying process. These costs are paid during the traditional approach to home selling where a lender is involved.
Closing costs for buyers
Buyers have two separate categories of closing costs. The first involves the actual loan process from a lender. The other involve home maintenance.
Lender fees include the origination fee (money paid for the loan application), processing fees for the application, prepaid interest (usually towards the first month’s payment) and also point payments.
Third party fees include appraisal fees (determines the actual value of the home), mortgage insurance if necessary, tax monitoring services and even credit report fees to verify information. Many third party fees are relatively small compared to other fees and mortgage items.
New homeowner fees and expenses include items like property taxes, homeowners insurances and escrow account fees. Although property taxes and insurances are assessed annually, they are stored in and paid from escrow.
Closing costs for sellers
Sellers also have fees they are responsible for must like the buyer. However, these costs can be fewer, but greater, than that of the buyer.
Commissions on the sale of the home are monies paid to a real estate agent for finding you, the buyer. While 6% is the national average for commissions, they can range anywhere from 5% to 8%.
Transfer taxes are paid as a tax on the sale of the home to the state. Every state and locality can have its own rules for the amount paid. Some states charge based on the value of the building, not the sale price. And others charge a set amount of money per $500 of home value.