Chris Kilby

Closing costs are the fees and expenses that both buyers and sellers need to pay when finalizing a real estate transaction. These costs are paid at the "closing" or settlement, which is when the sale is officially completed, and ownership of the property is transferred.

Here’s a breakdown of typical closing costs:

For Buyers:

1. Loan-related Costs:
   ○ Origination Fees: Fees charged by the lender for processing the loan.
   ○ Appraisal Fee: Cost of hiring a professional to appraise the value of the property.
   ○ Credit Report Fee: Lender’s cost for pulling your credit report.
   ○ Inspection Fees: Home inspection, pest inspection, or other types of property inspections.
   ○ Title Search/Title Insurance: Ensures the title to the property is clear and insures against any future title disputes.
   ○ Attorney Fees: In some states, buyers need to hire an attorney to review or prepare documents.
   ○ Mortgage Insurance: If applicable (e.g., PMI for conventional loans or FHA mortgage insurance).
2. Prepaid Expenses:
   ○ Property Taxes: Buyers often have to reimburse the seller for taxes they've already paid, or you may prepay taxes for the first year.
   ○ Homeowners Insurance: Buyers may need to pay the first year's premium upfront.
   ○ Interest: Some lenders may require that you prepay the interest from the closing date to the end of the month.
3. Down Payment: This is the money you put down upfront toward the purchase price of the home, usually a percentage (e.g., 20%).

For Sellers:

1. Agent's Commission: This is usually the largest cost for sellers, typically 5–6% of the sale price, which is split between the seller’s and buyer’s agents.
2. Repairs: If the home inspection reveals issues, the seller might agree to pay for repairs or offer a credit to the buyer.
3. Title Insurance: In some areas, the seller is responsible for purchasing title insurance for the buyer.
4. Transfer Taxes: Some localities charge a tax to transfer the title of the property from seller to buyer.
5. Outstanding Liens or Mortgages: If the seller still owes money on the property, that amount is paid off at closing.

While a home inspection is not legally required, it’s highly recommended and often considered essential when buying a home. Here’s why:

Why You Should Get a Home Inspection:

1. Uncover Hidden Problems
2. Negotiation Leverage
3. Peace of Mind
4. Lender Requirements
5. Protect Your Investment

Types of Inspections You Might Consider:
● General Home Inspection
● Termite Inspection
● Radon Test
● Mold Inspection
● Sewer Line Inspection

How Much Does It Cost?
Varies by location, size of the home, and the type of inspection(s) needed.