Congratulations on reaching the final steps toward owning your new home! With your offer accepted and loan approved, you’re nearly there. Now, it’s time for the “closing,” the process that officially transfers ownership from the seller to you. At this stage, you’ll sign documents and pay for various fees, known as closing costs. Here’s a breakdown of what you’ll likely encounter:
- Appraisal Fee: Covers the professional appraisal of your new home, often paid earlier in the process.
- Credit Report Fee: Charges for the lender-requested credit report, sometimes already paid with the loan application.
- Loan Origination Fee: A fee (typically around 1% of the loan) that goes to the lender for processing.
- Discount Points: Optional payments to reduce your interest rate, with each point costing 1% of the loan.
- Title Insurance: Covers the title search and insurance, ensuring your claim on the property is secure.
- PMI Premium: Required if your down payment is low, protecting the lender if you default. You can cancel PMI once you reach 20% equity.
- Prepaid Interest: Interest from your closing date until the first mortgage payment.
- Escrow Accounts: Holds funds for property taxes and insurance, often collecting one year’s insurance and several months’ taxes upfront.
- Recording Fees and Transfer Taxes: State and local charges for registering the property transfer.
Tip: Discuss these individual costs with your real estate professional, as fees vary. You can also negotiate some, or all, expenses with the seller!
