Closing Costs 101: What You'll Pay for, and Why

By Karen Lawson
LoanPage.com Columnist

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Soon after your offer to buy a home is accepted, you'll receive an estimate of closing costs. This list of costs will likely appear on a standardized form called a HUD 1. The form is divided into two columns showing costs to be paid by buyers and sellers. Here's a list of common closing costs, which can vary according to regional laws and custom.

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Mortgage Charges and Fees

When your mortgage lender makes a loan, they charge a fee for this service, and may pass on certain costs to you. You can generally expect to pay a lender's fee, a document preparation fee, and fees for recording mortgage documents and deeds with your county recording authority. Lender fees may be negotiable to some extent, and it's best to do this when you are looking for a mortgage loan. Recording fees are set by the recording authority, and are not negotiable.

Property Valuation, Condition, and Title

The real property that you are buying serves as security for your mortgage loan. Therefore, your lender must establish the actual value of your new home, and you will have to pay for an appraisal. A home warranty provides coverage for major repairs. It's usually a good idea to have this coverage for your first year in a new home. Title insurance, or an abstract of title, is a report based on a search of public records.

Closing Your Loan

Depending on where you live, the actual closing process will be handled by an escrow company or law firm. This firm will charge a fee for its services which can be paid by buyer, seller, or both. Closing cost calculator tools are widely available online to help you estimate and compare closing costs in your area.

About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds an MA degree in English from the University of Nevada, Reno.

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