Closing costs are one of the most important aspects of your journey to purchasing a home. You may have heard of them from your realtor or a simple Google search, but what are they exactly? Simply put- they are unavoidable costs the buyer pays to purchase a home. Usually closing costs range anywhere from 2%-3% of the loan amount. More specifically, closing costs contain two types of costs: “Loan costs” and “Other costs.”
The majority of loan costs are related to Title. These fees involve any underwriting fees, title insurance, settlement charges, attorney fees and title searches.
Aside from loan costs, there are also other costs associated with the closing of a mortgage loan. These include:
Prepaid Interest: This is the interest owed between the time of settlement and the end of the month.
Prepaid Property Taxes: Depending on which month of the year you close, be prepared to pay a portion of your county or city property taxes at closing.
Recording Fees: These are fees to record the transaction and related documents. Escrows: Taxes and insurance payments that are paid into a bank account on your behalf. These funds are accumulated and used to pay your annual property taxes and homeowner insurance.