Buyers closing costs breakdown

At closing you will be given a stack of paperwork that shows line-by-line the cost of completing your real estate transaction. (These costs are in addition to your down payment, minus escrow money, that you also bring to closing.) It will be a staggering amount — totaling 3 to 5 percent of your purchase price.

Called “closing costs” or “settlement costs,” these fees mean you need to bring a certified check or personal check to your closing ceremony whether it takes place at a title company, a bank, or an attorney's office. The final costs to you may be quite different from your lender's original “good faith estimate,” especially in the categories involving attorney or title fees.

The fees below are what is generally required, but every buyer will not pay every fee listed. Maybe you worked a deal with the seller to pick up part of the closing costs. And there are many geographic differences. Finally, all lenders do not charge every fee shown.

Commissions
How much: Traditionally 6% split between buyer and seller agents; usually 3% to buyer's agent, 3% to seller's agent.
Description: Payment for the work agents have done. All real estate agent/broker sales commissions are paid at closing.
Who pays: Seller pays unless local custom dictates otherwise, or a deal to split commissions was negotiated and written into the sales and purchase contract.

Note: These costs are not included in your lender's “good faith estimate.”

General Loan Fees

Loan Origination Fee
How much: Usually at least 1 percent of the total loan amount. This fee is also called “point” or “points.” One point equals 1 percent of the loan.
Description: Lenders cover their administrative costs by taking this fee up front.
Who pays: Buyer

Note: In some areas seller pays half. Also, there are loans with no origination fee.

Loan Discount (Points)
How much: Discount on interest
Description: This fee refers to a one-time charge imposed by the lender or mortgage broker to lower the interest rate and therefore the monthly mortgage payment. The more points paid up front, the lower the interest rate. The loan discount is also called “point” or “discount point.” Note that the interest rate does not drop by one percent per point.
Who pays: The buyer pays unless the seller agreed to help in some way.

Application Fee
How much: Average is under $300, though some experts report charges up to $500.
Description: Most lenders charge an application or “lender's processing” fee.
Who pays: Buyer

Appraisal Fee
How much: Expect about $300. It can be higher or lower, depending on the size of the property and appraisal fees in your area.
Description: The bank hires an independent appraiser to determine whether the property is worth the sales price you've offered for it.
Who pays: Buyer

Credit Report Fee
How much: This fee, also called a “credit check fee,” averages about $25 per credit report checked, although some borrowers have paid three times more.
Description: The lender analyzes your credit history by scrutinizing credit scores and reports — a critical step toward deciding whether to loan you money and how much.
Who pays: Buyer

Lender's Inspection Fee
How much: Under $100
Description: If you are building a new home or buying a home that's under construction, the lender may charge an inspection fee.
Who pays: Buyer

Mortgage Insurance Application Fee
How much: Varies
Description: When the down payment is less than 20 percent of the purchase price, you are required to carry Private Mortgage Insurance (PMI), to protect the lender should you default on your loan.
Who pays: The buyer pays monthly payments for PMI until equity reaches 20 percent.

Note: Some lenders charge a fee for processing the application paperwork.

Assumption Fee
How much: Varies
Description: Buyers sometimes take over (assume) the seller's existing mortgage. If so, the lender may charge a fee.
Who pays: Buyer

Lender's Attorney Fee
How much: About $400
Description: If the lender involves an attorney in the loan transaction, the buyer can expect to be charged.
Who pays: Some buyers have balked successfully. Their lenders have dropped this fee.

Advance Loan Fees
How much: Varies
Description: The buyer may be required to make these payments at closing.

Interest
How much: Can range from one to 30 days' worth of interest
Description: Most lenders require the buyer to pay the interest that will accrue on their loan from the date of settlement to the first monthly mortgage payment due date.
Who pays: Buyer

Mortgage Insurance Premium
How much: Varies
Description: Some lenders require borrowers to pay their first year's mortgage insurance premium up front. Other lenders ask for a lump sum insurance premium payment at closing that covers the life of the loan.
Who pays: Buyer

Hazard Insurance Premium
How much: A full-year hazard (homeowner's) insurance policy premium payment
Description: This policy protects the lender against loss from fire, wind, or other natural disasters.
Who pays: Buyer

Flood Insurance Premium
How much: Varies
Description: Lenders may require flood insurance, depending on the property location.
Who pays: Buyer

Earthquake Insurance
How much: Varies
Description: Depending on the property location, it is possible the lender will require earthquake insurance.
Who pays: Buyer

Reserve Account Funds
Description: Your monthly mortgage payments are likely to include a pro-rated amount to cover payments for property taxes and homeowner's insurance, also called “hazard” insurance. This money is held in a “reserve” or “escrow” account by the lender who makes the payments for you. At closing, your lender may require you to pony up advance payments just to be sure the reserve fund has enough money to pay the bills.

Homeowner's Insurance
How much: Two months' worth
Who pays: Buyer

Mortgage Insurance
How much: Two months' worth
Who pays: Buyer

City Property Taxes
How much: Two months' worth
Who pays: Buyer

County Property Taxes
How much: Two months' worth
Who pays: Buyer

Annual Assessments
How much: Two months' worth
Description: Annual assessments made by your condominium or homeowners association also may be included in your monthly mortgage payments.
Who pays: Buyer

Title Charges

Title Search
How much: About $200-$400
Description: A title search is done to make sure there aren't any unpaid mortgages or tax liens on the property.
Who pays: Negotiable

Title Insurance Fees
How much: This fee averages about $350 but can be as high as one percent of the loan, depending on your state of residence.
Description: Title insurance is a policy that protects the owner by guaranteeing the title to the property is clear.
Who pays: Buyer

Note:There may be a second fee listed on the closing document to cover a separate policy that protects the lender.

Documentation Preparation Fee
How much: Average about $200
Description: Lenders and title companies sometimes charge this fee, saying it covers the cost of preparing final legal papers.
Who pays: Buyer

Note: Experts call this a “junk fee.” You can negotiate this away from title insurance or lender.

Notary Fees
How much: Varies
Description: This fee buys sworn testimony from a licensed notary public who has witnessed that the people named in the documents really are the people who signed them.
Who pays: Buyer

Attorney Fees
How much: The fees could be under $500 or more than $1,000, depending on the situation.
Description: In some parts of the country an attorney, not a title company, handles closing, and sometimes an attorney is hired by the lender to review certain documents.
Who pays: Buyer

Government Recording and Transfer Charges

There are great differences in the practices of state and local governments. Who pays which of these fees also varies, according to the terms negotiated in the sales contract.

Recording Fees
How much: Average about $100
Description: Covers getting the sale recorded in the public record.
Who pays: Usually paid by the Buyer

Transfer Taxes
How much: Varies
Description: These can be significant in places where they are collected. Some governments also require the purchase of tax stamps.
Who pays: Buyer

Miscellaneous Settlement Charges

Whether buyer or seller pays the following fees depends on what sort of deal was negotiated in the sales contract.

Survey
How much: About $1,000
Description: Sometimes a lender requires a survey of the property.
Who pays: Buyer

Pest Inspection
How much: Varies
Description: Depending on location, a termite or other pest inspection may be required.
Who pays: Usually seller

Lead-Based Paint Inspection
How much: Varies
Description: Covers the cost of evaluating lead-based paint risk.
Who pays: Usually buyer.

Courier Fee
How much: Varies
Description: Charged if a courier picks up and delivers documents.
Who pays: Buyer