Closing Costs Explained

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Closing costs are charges related to the purchase of a real estate that go beyond the actual sales price of the property in question.

Where closing costs come from

Closing costs can accumulate in one of two categories:

  • The origination of a loan -- Closing costs of this nature involve the actual creation of a home loan and the fees associated with the lending process.

  • Property costs -- There are certain requirements of a loan that might directly involve the property. These requirements can tack on to the total price of purchasing a property and might show up in the form of closing costs.

Who pays closing costs?

The actual responsible party for closing costs is generally the borrower. There are some situations, however, where the seller or the lender might pay some or all of the associated costs of closing a real estate transaction.

What might figure into closing costs?

There are a number of charges that can be added into closing costs. The total amount to anticipate in this type of fee is between 3 and 6 percent of the total amount of money borrowed. Some of the charges that might appear in closing costs include:

  • Loan application fees;
  • Credit reporting fees;
  • Title search and title insurance;
  • Appraisal;
  • Legal fees;
  • Inspections;
  • Taxes and document stamps;
  • Points and origination fees;
  • Escrowing fees.