Fees that must be paid on (or before) the closing date by the buyer and/or seller in addition to the down payment
These fees, which average 2-5% of a loan's amount, are paid on (or before) the closing date. Closing costs normally vary based on a combination of three factors - the lender, the property's location and the type of mortgage you choose. It's best to have a good idea of all the costs early on: ask your closing agent for a pre-closing HUD-1 document, which gives a detailed list of the expected closing costs.
Closing costs generally include:
|Lender or broker points and origination||Covers a lender or broker's administrative costs. Points are a percentage of the loan amount and origination fees can be .375 to 2.5% of the loan amount.
||Lender or broker|
|Loan-related||These fees are specific to each lender and cover costs like underwriting the loan, document preparation, or flood certification.
|Third-party||Covers the title insurance, title search, escrow fee, credit report and appraisal fee.
|Impounds and interest||Lenders sometimes want the borrower to pay for some expenses up-front: property taxes (first six months), hazard insurance, mortgage insurance and interest earned between closing and the end of the month.
|Prorations||The buyer may owe the seller money for costs, like property taxes and Home Owners' Association dues, paid until the year's end. So, if the buyer moves in June 1, he/she owes the seller the remaining 6 months of taxes.