Closing costs refer to the fees and expenses that both buyers and sellers must pay during the closing of a real estate transaction. These costs cover various services required to finalize the transaction. Here’s a breakdown to help understand closing costs:

1. For Buyers:

• Loan Origination Fee: Charged by the lender for processing the loan.
• Appraisal Fee: Covers the cost of having the home professionally appraised to determine its market value.
• Home Inspection Fee: Paid for a professional inspection to assess the condition of the home.
• Title Search and Insurance: Title search ensures the property has no outstanding legal issues (liens, claims). Title insurance protects against future claims.
• Attorney Fees: In some states, an attorney is required to oversee the transaction, and their fee is included.
• Prepaid Costs (Escrow): Includes homeowner’s insurance, property taxes, and sometimes mortgage insurance, which are prepaid and put into an escrow account.
• Private Mortgage Insurance (PMI): Required if the down payment is less than 20% of the purchase price.
• Recording Fees: Charged by local governments for recording the sale.
• Survey Fee: If the lender requires a survey of the property boundaries.

2. For Sellers:

• Agent Commissions: Typically 5-6% of the sale price, split between the buyer’s and seller’s agents.
• Title Insurance (Owner’s Policy): Sellers usually pay for the owner’s title insurance to protect the buyer.
• Transfer Taxes: Some states or local governments impose taxes for transferring the property.
• Settlement Fees: Paid to the escrow or title company for handling the closing.
• Prorated Property Taxes and HOA Fees: Sellers pay a portion of property taxes and homeowners’ association (HOA) fees, prorated for the time they owned the home during the year.

Common Total Cost:

• For Buyers: Closing costs are typically 2-5% of the home’s purchase price.
• For Sellers: Costs can vary widely but often range around 6-10% of the sale price, primarily due to agent commissions.

Ways to Reduce or Offset Closing Costs:

• Negotiate with the seller to cover part of the closing costs (called a seller concession).
• Shop around for services, like title insurance or home inspection, to find the best rates.
• First-time homebuyer programs may offer credits or grants that help cover some closing costs.

Would you like details on any particular part of closing costs or help understanding a specific fee? Let’s chat!