Closing Costs

Closing is the final stage of the homebuying and mortgage process. During this time, you'll review and sign the documents needed to complete your loan and finalize the purchase of the property.

Before closing, you'll receive information about the final terms and costs associated with your loan. You'll also receive instructions for providing any funds needed to complete the transaction. Be sure to carefully review all instructions and ask questions about anything you don't understand.

For a home purchase, you'll typically complete a final walk-through of the property before closing to confirm its condition and that any agreed-upon repairs have been completed.

Once the required documents are signed, funds are provided, and the transaction is completed, ownership of the property can officially transfer to the buyer.

Some closing costs are associated with government fees and property taxes. The specific costs and who is responsible for paying them can vary depending on the property, location, and terms of the transaction.

Recording Fees: Fees may be charged to record documents related to the transfer of ownership and mortgage with the appropriate government office.

Transfer Taxes: State or local transfer taxes may apply when ownership of real property is transferred.

Prorated Property Taxes: Property taxes and certain other expenses may be divided between the buyer and seller based on when ownership transfers.

Other Government Fees or Assessments: Additional local fees, taxes, or assessments may apply depending on the property and transaction.

Some closing costs may be paid to third-party service providers involved in the mortgage or real estate transaction. The services required and who pays for them can vary depending on the loan and terms of the transaction.

Appraisal Fees: An appraisal may be required to provide an independent estimate of the property's value.

Title Services: These may include a title search, lender's title insurance, and other services associated with verifying and insuring the property's title.

Escrow or Settlement Services: Fees may apply for services related to coordinating the closing, handling documents, and disbursing funds.

Other Third-Party Services: Depending on the transaction, additional services such as credit reports, flood determinations, inspections, or other required services may result in additional costs.

In addition to closing costs, you may need to pay certain expenses in advance or fund an escrow account at closing. These amounts can vary depending on your loan, property, insurance, taxes, and closing date.

Homeowners Insurance: You may be required to pay your homeowners insurance premium in advance as part of the closing process.

Prepaid Interest: Depending on when your loan closes, you may pay interest covering the period between your closing date and the beginning of your first full mortgage payment period.

Property Taxes: Certain property taxes may be due or collected at closing depending on the timing of the transaction.

Initial Escrow Deposit: If your loan includes an escrow account, funds may be collected at closing to establish the account for future property tax and homeowners insurance payments.

The Real Estate Settlement Procedures Act (RESPA) is a federal law designed to provide consumers with information about the costs associated with the mortgage settlement process and to protect consumers from certain abusive settlement practices.

When you apply for most mortgages, you generally receive a Loan Estimate within three business days after submitting the information needed for a loan application. The Loan Estimate provides important details about the loan, including the estimated interest rate, monthly payment, and closing costs.

Before closing, you'll also receive a Closing Disclosure at least three business days before closing that provides the final details of your mortgage loan and closing costs. Review these documents carefully and ask your loan officer about anything you don't understand.