What are closing costs?
Closing costs are the fees and prepaid expenses due when a home loan is finalized, on top of the down payment. They include lender charges, the appraisal, title insurance and settlement fees, government recording fees, and the first deposits for property taxes and homeowners insurance. You receive an itemized estimate soon after you apply.
Closing costs fall into two groups. The first is the cost of getting the loan and transferring the property: lender fees, appraisal, title work and recording. The second is money set aside for bills you would owe anyway, such as insurance and property taxes.
Within three business days of applying you receive a Loan Estimate that lists these costs. A few days before closing you receive a Closing Disclosure with the final figures, so you can compare the two.
There are several ways to handle closing costs, including seller contributions negotiated in the contract. Each has trade-offs worth understanding.
Related questions
Can the seller pay my closing costs?
A seller can agree to contribute, up to limits set by the loan program. It is part of the negotiation in your purchase contract.
Can closing costs be rolled into the loan?
On a refinance, often. On a purchase, generally not directly, though there are other ways to reduce the cash you bring.
When do I find out the exact amount?
The Closing Disclosure shows the final figures. You receive it at least three business days before closing.
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