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What Are Closing Costs?

 


You've found your dream home, the seller has accepted your offer, your loan has been approved and you're eager to move into your new home. But before you get the key, there's one more step--the closing.

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Also called the settlement, the closing is the process of passing ownership of property from seller to buyer. And it can be bewildering. As a buyer, you will sign what seems like endless piles of documents and will have to present a sizable check for the down payment and various closing costs. It's the fees associated with the closing that many times remains a mystery to many buyers who may simply hand over thousands of dollars without really knowing what they are paying for.

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As a responsible buyer, you should be familiar with these costs that are both mortgage-related and government imposed. Although many of the fees may vary by locality, here are some common fees:

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Appraisal Fee: This fee pays for the appraisal of the property. You may already have paid this fee at the beginning of your loan application process.

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Credit Report Fee: This fee covers the cost of the credit report requested by the lender. This too may already have been paid when you applied for your loan.

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Loan Origination Fee: This fee covers the lender's loan-processing costs. The fee is typically one percent of the total mortgage.

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Loan Discount: You will pay this one-time charge if you have chosen to pay points to lower your interest rate. Each point you purchase equals one percent of the total loan.

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Title Insurance Fees: These fees generally include costs for the title search, title examination, title insurance, document preparation and other miscellaneous title fees.

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PMI Premium: If you buy a home with a low down payment, a lender usually requires that you pay a fee for mortgage insurance. This fee protects the lender against loss due to foreclosure. Once a new owner has 20 percent equity in their home, however, he or she can normally apply to eliminate this insurance.

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Prepaid Interest Fee: This fee covers the interest payment from the date you purchases the home to the date of your first mortgage payment. Generally, if you buy a home early in the month, the prepaid interest fee will be substantially higher than if you buy it towards the end of the month.

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Escrow Accounts: In locations where escrow accounts are common, a mortgage lender will usually start an account that holds funds for future annual property taxes and home insurance. At least one year advance plus two months worth of homeowner's insurance premium will be collected. In addition, taxes equal approximately to two months in excess of the number of months that have elapsed in the year are paid at closing. (If six months have passed, eight months of taxes will be collected.)

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Recording Fees and transfer taxes: This expense is charged by most states for recording the purchase documents and transferring ownership of the property.

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Make sure you consult a real estate professional in your area to find out which fees--and how much--you will be expected to pay during the closing of you prospective home. Keep in mind that you can negotiate these costs with the seller during the offering stage. In some instances, the seller might even agree to pay all of the settlement costs.

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Berkshire Realty Inc. DRE License # 01978327

Call/Text: 818-502-1750  - arting@yahoo.com

213 N. Orange St, Suite E - Glendale, CA 91203

Copyright © 2025

Information is courtesy of Artin Ghassemian of Berkshire Realty. Data is based on information from the Association of REALTORS/Multiple Listing and/or other sources and is deemed reliable but not guaranteed. The Broker/Agent providing the information contained herein may or may not have been the Listing and/or Selling Agent. Site is managed by Berkshire Realty. © 2025. All Rights Reserved.

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Based on information from one of the following Multiple Listing Services: CRMLS, CLAW, I-Tech, ROWMLS, GPSMLS, SDMLS, VCRDS/PFAR, Idyllwild Association of Realtors, Ojai Valley Board of REALTORS and/or AVMLS. Information being provided is for the visitor’s personal, noncommercial use and may not be used for any purpose other than to identify prospective properties visitor may be interested in purchasing. The data contained herein is copyrighted by CRMLS, CLAW, I-Tech, ROWMLS, GPSMLS, SDMLS, VCRDS/PFAR, Idyllwild Association of Realtors, Ojai Valley Board of REALTORS and/or AVMLS is protected by all applicable copyright laws. Any dissemination of this information is in violation of copyright laws and is strictly prohibited. Property information referenced on this web site comes from the Internet Data Exchange (IDX) program of the MLS. This web site may reference real estate listing(s) held by a brokerage firm other than the broker and/or agent who owns this web site. For the avoidance of doubt, the accuracy of all information, regardless of source, is deemed reliable but not guaranteed and should be personally verified through personal inspection by and/or with the appropriate professionals.

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