When purchasing or refinancing a home, the final step in the process is the closing. It’s important to keep in mind that there will be additional costs associated with closing on your home. If you are a first time homebuyer, you’re probably aware that you need to save money for a down payment, but you may not realize the full costs associated with closing, and they typically run anywhere between 3 – 6 percent* of your approved loan amount.
So What Are Closing Costs?
The term “closing costs” is a bit vague but essentially straight forward. These are the costs incurred at the closing of your mortgage. They may include:
- Loan origination fees
- Appraisal fees
- Title searches
- Credit report charges
- Any other fees and expenses incurred
Why Are Closing Costs Necessary?
While no one looks forward to additional costs, the fees actually benefit you. Title searches and other fees help protect you so that you know you have legal possession of your home.
Who pays for the Closing Costs?
For the most part, you as the buyer will pay for the closing costs. However, depending on the loan product, some of the costs may be absorbed by other parties. For instance, with VA loans there are limits to what buyers pay in closing costs.
*percentages listed are an estimate and may not reflect the percentage rate you will pay.