What fees are involved in the closing costs?
It depends which side of the table you’re sitting on. If you’re a buyer, you’ll get a list of your expected closing costs when you first sign up for your mortgage as part of what’s called your "good faith estimate." But you won’t really be able to know the exact dollar amounts until the end of the process because many of the costs are based on percentages. Additionally, some things on the list won’t apply to your purchase because of your state or your type of property. In general, though, you can expect your total closing costs to add up to about 1 to 4 percent of the purchase price, and that’s above the down payment.
The major players your dollars are going toward are your lawyer, the bank, the title company, and the government. Your lawyer will likely charge you a flat fee but may itemize for document production, couriers, and postage. The bank will include its mortgage application fee and appraisal charge, which you probably paid well before the closing, and also fees for documents, underwriting, and all the costs associated with the mortgage. The title company will have a hefty insurance fee. And the government will put in for recording fees and other taxes. (Okay, breathe.)
If you’re a seller, your major cost will be paid to your real estate broker, who will likely get 3 to 6 percent as a fee. Your next biggest check will go to the government, which will want a transfer tax of 1 to 2 percent, depending on the state. Then you'll have lawyer fees, miscellaneous bank fees, and document processing fees. Altogether, these charges could add up to anther 2 to 7 percent. So when you calculate the profit you’re going to make, be sure to subtract at least 10 percent for the cost of doing business.
And if you’re buying a new home at the same time you’re selling the old one, prepare yourself for a double whammy (sorry!). There’s nothing you can do to help being charged on both ends of the equation. But hey, look at it this way: You’re unloading your old digs to transition into your dream house, which is worth every penny.
by The Nest Editors
1/31/08
See more:
buying a home,
Real Estate