What Closing Costs Do You Have to Pay for at the Closing Table?

July 21st, 2009
Categories:Home Buyer Education

Real Estate Closing Costs Can be a Little OutrageousThis question was sent to me twice last week, so I thought I would post the answer in blog for anyone else looking for this answer.

Below you’ll find a laundry list of the fees you will most likely see in a real estate transaction. When deciding who pays for what fees, that will depend on what you negotiate when you agree to buy or sell the home. In this market, its a common misconception the seller pays for all the closing costs. While it happens a good deal of the time, it is still very common to see a buyer willing to pay their own costs.

When it comes to negotiating a purchase offer you’ll find one of two scenarios typically play out with the closing costs. Scenario One: The seller pays the closing costs and the sale price of the home remains the same or increases (to justify the amount of the closing costs). Scenario Two: The seller doesn’t pay any closing costs, but they decide to lower the purchase price of the home. Its normally a matter of how much cash the buyer wants to bring to the closing table.

Closing costs will vary from transaction to transaction based on 4 main factors:

  1. The state you are buying or selling a home in
  2. The fees charged by the title company
  3. The fees charged by the lender
  4. The terms agreed upon in the contract

I’ll break down some of the more common fees into sections. These fees are commonly broken down in a Good Faith Estimate (GFE) and in the HUD-1. The GFE will be given to you by your loan officer before you write a contract (ideally). The numbers on the GFE will only be estimates, hence the “E” in GFE. =) The HUD-1 will come about three to five days before closing and will contain the exact fees being charged.

Possible fees charged by the lender:

Most of my clients will see a loan origination fee of about 1%. While this varies from deal to deal, I feel comfortable knowing my clients are getting the best rate possible when I know where the lender’s income is coming from. I typically don’t see a Lender’s Inspection fee or a Mortgage Broker’s fee. I advise you and all my clients to challenge or simply question any of the fees you might not understand. If you need a professional, friendly and experienced loan officer, I am more than happy to recommend a professional.

Possible fees charged by the title company:

Title fees vary depending on the title company you choose to work with. Or in this market, the title company the bank wants you to use. For the most part title companies are willing to be competitive and will work with you to match other title company’s fees. Keep an eye out on the small fees like couriers fees, notary fees, etc. These are fees that can be snuck in last minute and can add up to some outrageous amounts. Again, I encourage you to challenge anything that seems out of line. I personally like to send the loan officer after the title company if they get out of line. After all the loan officer knows what is and isn’t reasonable and they can do a much better job fighting for you.

Closing Costs, the List Goes On and OnPossible Government Recording and Transfer Charges:

This is where the fees can vary state by state, county by county.

Possible Additional Fees:

Possible items required to pay in advance (per the loan):

Possible Reserves Deposited with the Lender:

These are items paid in advance to essentially build up the reserves.

That is a pretty good overview of what fees/closing costs are involved with a real estate transaction. Let me know if I have raised any questions or if you would like more information about a specific topic. I am more than happy to help!

Related posts:

  1. The Closing Table – What to Know
  2. Survey Results: Downpayment and Closing Costs are the Biggest Obstacles
  3. FAQ: Why Do I Have to Pay the Hazard Insurance Premium Up Front?
  4. Government Workout Programs
  5. Yes on 100 – Protect Our Homes

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This entry was posted on Tuesday, July 21st, 2009 at 6:00 am and is filed under Home Buyer Education. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

  1. Beth Wakeley said at July 21st, 2009 at 3:53 pm

    Hey Marcus,

    Termite inspections are only required on VA loans or any new construction loan.

    Funding fees are not paid upfront. They are financed into the loan amount or paid in cash at closing (never seen that happen!)

    School Tax – I have never seen this charge before

    Lender Inspection Fee – charged on new homes or if a resale has any required repairs

    State Tax Stamps – not paid by buyer on purchase transactions

    Talk to you soon

    Beth

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