How Much are Real Estate Closing Costs?

If you are a first-time homebuyer, you can be surprised to find out that there are more fees at the end of the process. These fees are called closing costs and you may wonder what exactly you are paying for. Unfortunately, obtaining a mortgage is not free and before you get keys to your new property, you will have to sign many documents and paperwork to obtain the homeownership you want.

The basic explanation of closing costs is the payments for the services the lender and other parties have performed. Closing costs range from 3% to 6%. The average closing costs for a buyer in the U.S. is $5,700. The higher averages are in the northeast. All of the closing costs in your transaction will be itemized on your loan and closing disclosure.

Application Fee

An application fee for the loan can be charged by the lender to process the mortgage

Attorney Fee

This can be charged by a real estate attorney that reviews the home and purchase agreement contracts.

Closing Fee

This is an escrow fee that is paid to the escrow company that handles the closing of the transaction.

Courier Fee

This fee can help expedite the transportation of the signed documents.

Credit Report Fee

This is a charge from the lender to pay for pulling your credit score from the three main reporting bureaus.

Escrow Deposit

This can be required by the lenders to cover up to two months of property tax and mortgage insurance payments. This goes into an escrow account.

FHS PMI

These types of loans require an upfront mortgage insurance premium of the base loan amount to be paid at closing.

Flood determination and monitoring fee

This is charged for a certified flood inspector to determine if the property is in a flood zone.

Homeowners association transfer fee

If you are purchasing a home that has a homeowners association. This is the transfer fee that covers the cost of switching the ownership and document costs.

Homeowners insurance

This is required by the lender for payment of the first year's homeowners insurance.

Lenders title insurance

This is a one-time fee that the title company charges to protect the lender if there is an ownership dispute.

Lead-based paint inspection

This is up to you, but you can pay a certified inspector to determine if the property has hazardous lead-based paint.

Owner's title insurance

This can prevent you in the event someone challenges your ownership of the home. It is optional.

Origination Fee

The origination fee covers the lender's administrative costs and it is typically about 1% of the loan amount.

Pest Inspection

This fee covers the cost of a professional pest inspection.

Prepaid daily interest charges

This payment covers prorated interest on your mortgage that will accrue from the date of closing.

Property Appraisal Fee

The required fee to pay the professional home appraisal company that assesses the home's fair market value.

Property Tax

At closing, you will pay any prorated property taxes.

Rate Lock Fee

This can be charged by the lender to guarantee to lock in a certain interest rate.

Real Estate Commissions

This is one of the larger fees. This is the commission charged by a broker. This is usually between 5-6% of the home's gross purchase price. This is split between the buyer and seller's agent.

It can feel overwhelming and look like a lot but your agent and the escrow company will break it all down for you to explain what closing costs pertain to you and your real estate transaction.