Closing costs are charges by everyone involved in the transaction. Closing costs occurred at the very end of the transaction just before you get the keys to your new home and the title transfers from the seller to you as the new buyer. Many people forget about these charges when thinking about the financing process.
The lender must disclose a good faith estimate of all settlement costs. A check to cover your closing costs will probably have to be a cashier’s check. The title company or other entity conducting the closing will tell you the required amount for:
- Loan origination fees.
- Points, or loan discount fees you pay to receive a lower interest rate.
- Credit report.
- Private mortgage insurance premium.
- Insurance escrow for homeowners insurance, if being paid as part of the mortgage.
Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and insurance in escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you.
- Deed recording fees.
- Title insurance policy premiums.
- Inspection fees—building inspection, termites, etc.
- Prorations for your share of costs such as utility bills and property taxes.