Muddling Through the Closing Cost Maze
Points. Title insurance. Escrow account deposits. Buying a home can make you feel like you're wandering through unfamiliar territory without a map. The estimate of closing costs from your lender won't mean much if you don't understand what you're paying for. Here's some help.
Appraisal fee - the cost of having a qualified appraiser determine the market value of the home you're buying.
Credit report - helps the lender decide whether to approve you for the loan.
Escrow deposits - money that will be held in a special account and used to pay taxes, insurance, or other items.
Inspection fees - cover the cost of structural, pest, radon, and other inspections required by your lender.
Loan discount (points) - a one-time charge that allow you to obtain a lower interest rate. Each point equals 1% of the loan amount.
Loan origination fee - covers the administrative cost of processing your loan.
Recording fees and taxes - state, county, and local charges for recording the mortgage and deed, and transfer taxes that may be levied when property changes owners.
Survey fee - cost of having a surveyor determine the property's boundaries.
Title search and insurance - a title search confirms that the seller has the right to sell the property. Title insurance protects you and the lender in the event of an error.
You won't necessarily need to pay for all of these items. Look at the estimate your lender provides to get an idea of what will be included in your closing costs.
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