Closing costs refer to all the expenses associated with a real estate transaction. The closing costs owed by each party depends on the agreed upon purchase price, contract terms, and even location. Needless to say, if you don’t know what you’re looking for, understanding your closing costs can be a bit overwhelming. This buyer closing costs explained blog breaks down the closing costs on the buyer’s side of the settlement statement to help you better understand all fees associated with your real estate transaction.
Buyer Closing Costs:
Most people obtain a mortgage when buying a home, which is the source of the majority of the buyer’s closing costs. Buyers should expect to pay between 2-4% of the sale price in closing costs, however, it is not uncommon to ask the sellers to pay for all or part of their closing costs. Below is a list of the common closing costs owed by buyers if they pay their own fees.
This section lists the sales price of the home, and will also list the buyer’s loan amount. This is the basis for all subsequent fees.
2) Prorations & Adjustments
This section lists any HOA dues that need reimbursed to the seller in the event the seller has already paid dues for time which extends beyond the day of closing. Also, any county taxes owed by the buyer or credited to the buyer will be listed here. Since property taxes are paid in arrears, most of the time, the buyers will receive a credit here.
3) Loan Charges
This section includes the fees associated with the buyer’s loan. The main costs are the loan origination fees (0.5-2% of the loan amount). This may be itemized on your settlement statement as an application fee, processing fee, underwriting fee, and prepaid interest charge. However, some title companies lump it all together as a single loan origination fee.
4) Other Loan Charges
This section lists other loan charges, and include the following:
- Appraisal Fees: $350 – $500
- Credit Report Fees: $15 – $25
- Flood Certification: $5 – $15
This section only pertains to the buyers, and lists the amount owed for any home owners insurance and county property taxes due at closing. Often times, the lender requires the buyer to pay 3 months of home insurance, and 5 months of property taxes at closing.
6) Title Charges & Escrow/Settlement Charges
This section includes all the fees charged by the title company to both parties. Typical buyer fees include:
- Lender’s Title Insurance Premium: about $100
- ALTA Endorsements for Environmental Protection Liens: about $50
- ALTA Endorsements for Restrictions/Encroachments: about $150
- Survey Fee: about $100
- Settlement Fees: $200 – $300
- Insurance Binder: $50
- Recording Fees: $30 -$100
- Courier Fees: $25 – $50
- Closing Protection Letter: $40
This section lists the real estate commissions owed by the seller, so there are typically no charges to the buyer here.
8) Government Recording & Transfer Charges
This section accounts for recording fees owed by the buyer for recording the deed ($25 – $40), and recording their mortgage ($60 – $200). It also lists the transfer tax paid by the seller.
This section lists the amounts the seller owes to pay off any mortgages and/or liens they have on their home. These fees do not pertain to the buyer.
10) Miscellaneous Fees
This section lists any additional closing costs. For buyers these include:
- Home Insurance Premiums: $500 – $1,500
- Additional Surveys Fee: $100 – $175
- Additional Brokerage (Document Storage) Fees: $200 – $300