Closing Costs

Definition

Also referred to as settlement costs, the fees and other monies due at the time of a home's purchase are known as closing costs.  These costs would not include the purchase price of the home, but those expenses associated with the legal transfer of the property and securing a loan.

Prior to a real estate closing, the lender or mortgage company will develop a "good faith estimate" of all costs.

Explanation

The settlement statement includes a summary of the money due and paid for by both the borrower and seller.  This good faith estimate will contain categories of costs due at the closing, including:

  • Lender Fees:  Origination fees, mortgage points, document preparation fees, overnight mailing services, and administrative costs.
  • Third Party Fees:  Title search fees, title insurance, flood certification, surveying costs.
  • Attorney Fees:  Document preparation, participation in meetings, standard fees to prepare documentation for a closing.
  • Government Fees:  Recording of deeds, state and local mortgage taxes.
  • Escrow Account and Interest:  Homeowner's insurance, real estate taxes held in escrow, private mortgage insurance, mortgage interest due up to the last day of the month.
  • Mortgage Points:  Prepayment of interest on a loan, where one point is equal to one percent of the mortgage or loan.

Related Terms

down payment, mortgage points, title insurance, escrow