The cost of buying a property goes beyond simply paying the price negotiated between the buyer and seller.

You’ll actually pay less, if you can pay cash. If you are taking a mortgage, the closing costs involved to complete the transaction can range from 2% to 7% of the purchase price.

Fees required vary by state. Here are some of the common fees included in a typical settlement, which will comprise your closing costs:

Fees related to a mortgage loan (if you are borrowing to buy):

• Compare lender rates and fees
• Loan discount (“points”) – a one-time fee charged by the lender to lower your monthly interest rate
• Appraisal fee* (the lender usually orders an appraisal to determine the value of the property)
• Credit Report fee* (for the lender to research your credit rating)
• Lender’s inspection fee* (for walking through the property)
• Mortgage insurance application fee* (for additional insurance to protect the lender if you default)
• Assumption fee* (fee to process new documents if a buyer is taking over a seller’s mortgage)
• Underwriting fee (the underwriter or insurer reviews your loan package and gives final approval to close to the lender)

* This fee is usually paid before you meet with the settlement or escrow agent to close the transaction.

Fees a lender requires you to pay in advance:

• Interest on your mortgage loan from the day of closing to the end of the month.
• Hazard insurance premium (protection from such hazards, as fire, wind or vandalism)

Amounts that may be deposited on reserve with the lender:

• Hazard insurance premium for the year (also called “Homeowner’s Insurance“)
• Mortgage insurance – the number of months varies
• City property taxes – usually two months in advance
• County property taxes – this amount can vary depending on when you close. (The impound account must be synchronized with the due date of property taxes. For example, if you close your loan one or two months after property taxes are due, you will generally only need to reserve one or two months worth of taxes. However, if you close near the end of the property tax cycle, you could be required to bring six to nine months worth of tax payments to the closing.)
• Annual assessments (cover any updated value placed on the property for tax purposes)

Fees related to the property’s title:

• Closing fee for the settlement agent or attorney (depending on who handles the closing)
• Document preparation (be sure to ask for details if you are charged for this; also ask about any “courier” fee if imposed)
• Notary fees (for witnessing signatures on legal documents)
• Attorney fees (if a lawyer is involved in the title process)
• Title Insurance – lender’s coverage (protects the bank), owner’s coverage (guarantees that the buyer has the right to the property)

Transfer and government recording fees:

• Fee to record (place on public file) the deed, mortgage and any releases
• County and possible city transfer taxes due on the recordation of the deed

Additional Settlement fees

• Pest inspection fee
• Other miscellaneous fees may include home inspections, land surveys, flood certification, earthquake insurance, radon tests, or lead-paint inspections depending on the location and history of the property.

See a sample HUD-1 Settlement Statement

Some banks and other lenders use their own closing agents. Some title companies offer special rates that may include escrow or settlement services, home warranty and title insurance at a “bundled” rate, so it pays to shop around.

Use our ClosingCost Calculator to estimate your monthly payments, closing costs and cash needed to close. You can also use it to find and compare real estate closing services and rates across the nation.