Closing costs are fees paid at the closing of a real estate transaction. This point in time called “the closing” is when the title to the property is conveyed or transferred to the buyer. Closing costs are incurred by either the buyer or the seller. RealSuccess will break down the types of closing costs to ensure you don’t run into any issues when arranging your first deal 

Closing costs are often the last thing a person thinks of when buying a home. While closing is the joyous moment the home becomes yours, the costs can be surprisingly aggravating

When you purchase a home, condo, or other property, you will go through a period known as escrow. During escrow, various issues related to the property transfer are worked out. The last day of escrow is known as the closing day in which you will pay closing costs.

Closing costs come in many forms. Some involve significant dollars while others are relatively painless. 

Here’s a list of typical costs:

1. Escrow Fees

An escrow agent is essentially a third party that works with the seller and buyer to finalize the transaction. For this assistance, the escrow agent will charge a fee. Depending on your area and the agent, you can expect fees from a few hundred dollars to around a thousand or so. Make sure you find out the fees before picking an escrow agent.

       2.Home Loan

Obtaining a home loan in the current market is a highly subjective event. “Points” can be a major cost associated with home loans. Points are essentially a fee you pay or have built into the loan for the privilege of being allowed to borrow money. A point usually equates to 1% of the loan. On a loan of $300,000, one point would equal $3,000. If you have excellent credit, you can shop for a loan that doesn’t require you to pay points.

      3.Home and Title Insurance

Insurance for your home and title is a must. If you’re borrowing money to purchase the home, each is mandatory. If you’re using your own funds, you should still get both forms of insurance. They provide insurance against issues involving your home and problems with the title transferred to you. Some of the most common claims filed against a title are back taxes that had been missed by a title company, liens from mortgage loans, home equity lines of credit, easements, and conflicting wills. You want to have a clear title.

      4.PMI

Private Mortgage Insurance, or “PMI”, is mandatory if your down payment is less than 20% of the purchase price. Private mortgage insurance is a lender’s protection in the event that you default on your primary mortgage and the home goes into foreclosure. You can expect to pay a few hundred dollars a year in PMI.

      5.Inspections, Appraisals, and Miscellaneous Fees

In the home purchase process, you’re going to use a variety of services.  The home inspector and appraisal fees are a few of the more common fees associated with the purchase of a property. Depending upon the state you live in, many of these fees may be built into your mortgage. Nonetheless, you need to know exactly what fees are included and what must be paid on closing day in order to budget accordingly.