What are closing costs?
Closing costs are costs that you will incur in the process of obtaining your mortgage. They typically include fees such as (but not limited to) points, (if applicable), credit, flood certification, appraisal, legal, title insurance, plot plan, recording fees, tax service and hazard insurance service fees. Additionally, at closing, there are escrows for property taxes and Private Mortgage Insurance, if applicable.
They are expenses – over and above the price of a home – incurred by buyers and sellers in transferring ownership of a property and can be substantial. Closing costs vary in different parts of the country and usually include a mortgage origination fee, an attorney’s fee, accrued taxes, an amount placed in escrow, and charges for obtaining title insurance and a land survey. Lenders generally estimate 3 percent to 6 percent of the loan amount in closing costs. On a $100,000 mortgage that would be $3,000 to $6,000. But since real estate closing practices vary widely from area to area, where you live will determine exactly what you will have to pay. Even if you are not required to escrow money for taxes, you may want to set aside this amount to assure that you will be able to pay those tax bills when they fall due. You can get a good idea of what applies where you are buying by checking with a few real estate agents and lenders or title agents.
