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Home Closing Costs

Review of Home Closing Costs
What makes up closing costs? Get a summary review of closing costs and types of assigned costs for borrower and seller.


Page Topics:

  1. review of home closing costs
  2. what makes up closing costs
  3. closing and adjustments
  4. specific settlement costs
  5. view the inspection kit as reference

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Review of Home Closing Costs

You can expect to pay a number of fees when you close on your home.

Closing refers to the time when you formally buy the home and transfer the title from the seller to the buyer.

There are two categories of closing costs:

  • lender closing costs
  • independent closing costs


Some closing costs are negotiable. You are more likely to negotiate lender closing costs.

In some "buyers market" where home sales are not as strong, you can often negotiate with the seller to pick up a portion of the closing costs.

Closing costs can average around 7% of the home purchase price. These costs can vary widely from 3% to 10% depending on your location and whether you pay points.

Closing costs are typically paid at the time of closing and can be a significant portion of your home savings. So budget and plan wisely.

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What Makes Up Closing Costs

Upon completion of your application, you will receive a "Good Faith Estimate" that itemizes your projected closing costs.

(note: the information below is for "home buying", but similar processes will be required for the seller of the home)

This is an estimate of costs only and does not signify the true amount of your closing costs. Costs may vary by area

Listed below are the most common closing costs with their related range of fees. Please note that fees will differ by location and circumstances.

To review a more detailed look at the closing:
link to the HUD-1 Settlement Statement Booklet.


Application Fee:

some lenders may charge an application fee to process and finalize your mortgage application.

This is generally a flat fee ranging from $75 to $300. Other lenders may charge a percentage of the mortgage loan amount (avoid these lenders).

You should check with your lenders before submitting your application. Some lenders will refund the fee if fail to qualify

Money Saving Tip: there is zero cost to submit your mortgage application through our financial network. It is entirely FREE. Lenders will compete for your business and provide an estimate of their terms if they can verify the information that you submitted.

If you choose to work with one particular lender, they may require you to complete a more thorough application where they may charge an application fee.

Negotiate with the lender to waive the fee since much of the information they need to approve your mortgage was provided by our network.


Appraisal Fee:

lenders must appraise the property to verify its value. Fees can range from $200-500. You can negotiate this fee with the lender on selecting an less expensive appraiser.


Attorney's Fees:

your attorney (or closing agent) will prepare and review the closing documents. These fees can range from $200-$500.

Some lenders may also charge fees for the lender's attorney services in connection to your mortgage. This is a fee you can negotiate down with the lender.


Credit Report Fee:

lenders will pull your credit report to qualify you for a loan. This fee is generally passed onto you once your application has been approved. The fee can range from $45-75.


Escrow Fees:

in most cases, lenders will setup an escrow account to collect fees for paying taxes, homeowners insurance, and other required collections

You will be required at closing in most cases to prepay from 6 months to 1 year of taxes and homeowners insurance. These fees will be placed in escrow and used when tax assessment and insurance premiums are due.

Pre-paid taxes and insurance can range from $1,500 to $4,000, depending on your area and tax assessment.

There is not room for negotiation of prepaid taxes and insurance.


Loan Origination Fees:

these are the points that you pay the lender for extending you a loan. A point equates to 1% of the mortgage loan balance; e.g., $100,000 at 2 points equals $2,000.

This can be the most significant portion of your closing costs. This is an area where you can negotiate.


Lock-in Fee:

if you lock-in your rate at a certain time prior to closing, the lender may charge you a rate lock-in fee.

This fee can range from 0.5% to 1.0% of the mortgage loan amount. Negotiate this fee with your lender prior to locking in your rate.


Mortgage Insurance:

There may be two types of mortgage insurance:

  • mortgage default insurance:
    private mortgage insurance (PMI) that protects the lender in the event you default on your loan. PMI is required for home buyers whose down payment is less than 20%. Costs may vary.

  • mortgage life insurance:
    insurance that names the lender as the beneficiary in the event of your death. This insurance may or may not be required as part of your closing and may be negotiable.


Notary, Recording, Survey Fees:

these are mandatory fees often required by local governments.

The notary fee guarantees the signatures to the document. This fee can range about $50 or less.

Recording fee pays for the recording of closing documents into the county records. This fee is about $50.

Survey fees pays the surveyor to show the exact boundary, location, and legal description. The cost can range from $200-$400 and may be paid by the seller in some areas.


Title Search and Insurance:

title search is where the lender (and you) ensure that the property purchase is free and clear of all obligations. This means that no party has a claim on the house because of unpaid dues, legal suits, and other.

Title search will be completed by an attorney or title company. However, some claims on your house can be missed during search. That is why the lender and you want Title Insurance, which protects your home from any claims that may pop-up in the future. Title Insurance is a one-time fee that you pay at closing.

Both the Title Search and Title Insurance are combined into one fee that can range from $400-$700.

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Closing Costs and Adjustments

The following information obtained from the Federal Consumer Information Center.
Buying Your Home: Settlement Costs and Helpful Information


  • The first page of the HUD-1 Settlement Statement summarizes all the costs and adjustments for the borrower and seller.
  • Section J is the summary of the borrower’s transaction and Section K is the summary of the seller’s side of the transaction. You may receive a copy of the seller’s side, but it is not required.
  • Section 100 summarizes the borrower’s costs, such as the contract cost of the house, any personal property being purchased, and the total settlement charges owed by the borrower from Section L.
  • Beginning at line 106, adjustments are made for items (such as taxes, assessments, fuel) that the seller has previously paid. If you will benefit from these items after settlement, you will usually repay the seller for that portion of the cost.
  • Here is an example for you to use in making your own calculations:



101. Contract sales price


102. Personal Property

103. Settlement charges to borrower (line 1400)




Adjustments for items paid by seller in advance

106. City/town taxes to

107. County taxes to

108. Assessments 6/30 to 7/31 (owners assn.)


109. Fuel Oil 25 gals. @ $1.00/gal.







Assume in this example, the cost of the house is $100,000 and the borrower’s total settlement charges brought from Line 1400 of Section L are $4,000. Assume that the settlement date is July 1. Here the borrower has agreed to pay the seller for the $40 Home Owners Association dues that have been paid for the month of July and for the 25 gallons of fuel oil left in the tank. This is added for a gross amount due from the borrower of $104,065.

  • Section 200 lists the amount paid by the borrower or on behalf of the borrower. This will include the deposit of earnest money you put down with the agreement of sale, the loan(s) you are getting and any loan you may be assuming.
  • Beginning at Line 210, adjustments are made for items that the seller owes (such as taxes, assessments) but for which you as the borrower will pay after settlement. The seller will usually pay you or credit you this portion at settlement.


201. Deposit of earnest money


202. Principal amount of new loan(s)


203. Existing loan(s) taken subject to







Adjustments for items unpaid by seller

210. City/town taxes to

211. County taxes 1/1 to 6/30 $1,200/ year


212. Assessments 1/1 to 6/30 $200/yr.











In this example, assume the borrower paid an earnest deposit of $2,000 and is getting a loan for $80,000. A tax of $1200 and an assessment of $200 are due at the end of the year. The seller will pay the borrower for six months or one-half of this amount. Line 220 shows the total $82,700 to be paid by or for the borrower.

  • Section 300 reflects the difference between the gross amount due from the borrower and the total amount paid by/for the borrower. Generally, line 303 will show the amount of cash the borrower must bring to settlement.


301. Gross Amount due from borrower (line 120)


302. Less amounts paid by/for borrower (line 220)




Adjustments To Costs Shared By Buyer and Seller:

  • At settlement it is usually necessary to make an adjustment between buyer and seller for property taxes and other expenses. The adjustments between buyer and seller are shown in Sections J and K of the HUD-1 Settlement Statement.
  • In the example given above, the taxes, which are payable annually, had not yet been paid when the settlement occurs on July 1. The borrower will have to pay a whole year's taxes on the following December 1. However, the seller lived in the house for the first six months of the year. Thus, one half of the year's taxes are to be paid by the seller. Accordingly, lines 211 and 511 on the HUD-1 Settlement Statement would read as follows:

211. County taxes 1/1/97 to 6/30/97


511. County taxes 1/1/97 to 6/30/97


  • The borrower is given credit for this amount at the settlement and the seller will pay this amount or count it as a deduction from sums payable to the seller.
  • Similar adjustments are made for homeowner association dues, special assessments, and fuel and other utilities, although the billing periods for these may not always be on an annual basis.
  • Be sure you work out these cost sharing arrangements or "prorations" with the seller before the settlement. You may wish to notify utility companies of the change in ownership and ask for a special reading on the day of settlement, with the bill for pre-settlement charges to be mailed to the seller at his or her new address or to the settlement agent. This will eliminate much confusion that can result if you are billed for utilities used when the seller owned the property.

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Specific Settlement Costs

The following information obtained from the Federal Consumer Information Center.
Buying Your Home: Settlement Costs and Helpful Information


This part of the Booklet discusses the settlement services which you may be required to get and pay for and which are itemized in Section L of the HUD-1 Settlement Statement

When shopping for settlement services, you can use this section as a guide, noting on it the possible services required by various lenders and the different fees quoted by service providers. Settlement costs can increase the cost of your loan, so compare carefully.

  • 700. Sales/Broker's Commission:
    This is the total dollar amount of the real estate broker’s sales commission, which is usually paid by the seller. This commission is typically a percentage of the selling price of the home.


700. TOTAL SALES/BROKER’S COMMISSION based on price $ @ %=



Division of Commission (line 700) as follows:


701. $ to

702. $ to

703. Commission paid at Settlement


800. Items Payable in Connection with Loan
These are the fees that lenders charge to process, approve and make the mortgage loan:

  • 801. Loan Origination: This fee is usually known as a loan origination fee but sometimes is called a "point" or "points." It covers the lender's administrative costs in processing the loan. Often expressed as a percentage of the loan, the fee will vary among lenders. Generally, the buyer pays the fee, unless otherwise negotiated.
  • 802. Loan Discount: Also often called "points" or "discount points," a loan discount is a one-time charge imposed by the lender or broker to lower the rate at which the lender or broker would otherwise offer the loan to you. Each "point" is equal to one percent of the mortgage amount. For example, if a lender charges two points on a $80,000 loan this amounts to a charge of $1,600.
  • 803. Appraisal Fee: This charge pays for an appraisal report made by an appraiser.
  • 804. Credit Report Fee: This fee covers the cost of a credit report, which shows your credit history. The lender uses the information in a credit report to help decide whether or not to approve your loan and how much money to lend you.
  • 805. Lender's Inspection Fee: This charge covers inspections, often of newly constructed housing, made by employees of your lender or by an outside inspector. (Pest or other inspections made by companies other than the lender are discussed in line 1302.)
  • 806. Mortgage Insurance Application Fee: This fee covers the processing of an application for mortgage insurance.
  • 807. Assumption Fee: This is a fee which is charged when a buyer "assumes" or takes over the duty to pay the seller’s existing mortgage loan.
  • 808. Mortgage Broker Fee: Fees paid to mortgage brokers would be listed here. A CLO fee would also be listed here.


801. Loan Origination Fee %

802. Loan Discount %

803. Appraisal Fee to

804. Credit Report to

805. Lender’s Inspection Fee

806. Mortgage Insurance Application Fee to

807. Assumption Fee

808. Mortgage Broker Fee




900. Items Required by Lender to Be Paid in Advance
You may be required to prepay certain items at the time of settlement, such as accrued interest, mortgage insurance premiums and hazard insurance premiums.

  • 901. Interest: Lenders usually require borrowers to pay the interest that accrues from the date of settlement to the first monthly payment.
  • 902. Mortgage Insurance Premium: The lender may require you to pay your first year’s mortgage insurance premium or a lump sum premium that covers the life of the loan, in advance, at the settlement.
  • 903. Hazard Insurance Premium: Hazard insurance protects you and the lender against loss due to fire, windstorm, and natural hazards. Lenders often require the borrower to bring to the settlement a paid-up first year’s policy or to pay for the first year's premium at settlement.
  • 904. Flood Insurance: If the lender requires flood insurance, it is usually listed here.


901. Interest from to @$ /day

902. Mortgage Insurance Premium for months to

903. Hazard Insurance Premium for years to

904. years to


1000 - 1008. Escrow Account Deposits

  • These lines identify the payment of taxes and/or insurance and other items that must be made at settlement to set up an escrow account. The lender is not allowed to collect more than a certain amount.
  • The individual item deposits may overstate the amount that can be collected. The aggregate adjustment makes the correction in the amount on line 1008. It will be zero or a negative amount.


1001. Hazard Insurance months @ $ per month

1002. Mortgage insurance months @ $ per month

1003. City property taxes months @ $ per month

1004. County property taxes months @ $ per month

1005. Annual assessments months @ $ per month

1006. months @ $ per month

1007. months @ $ per month

1008. Aggregate Adjustment

1100. Title Charges
Title charges may cover a variety of services performed by title companies and others. Your particular settlement may not include all of the items below or may include others not listed.

  • 1101. Settlement or Closing Fee: This fee is paid to the settlement agent or escrow holder. Responsibility for payment of this fee should be negotiated between the seller and the buyer.
  • 1102-1104. Abstract of Title Search, Title Examination, Title Insurance Binder: The charges on these lines cover the costs of the title search and examination.
  • 1105. Document Preparation: This is a separate fee that some lenders or title companies charge to cover their costs of preparation of final legal papers, such as a mortgage, deed of trust, note or deed.
  • 1106. Notary Fee: This fee is charged for the cost of having a person who is licensed as a notary public swear to the fact that the persons named in the documents did, in fact, sign them.
  • 1107. Attorney's Fees: You may be required to pay for legal services provided to the lender, such as an examination of the title binder. Occasionally, the seller will agree in the agreement of sale to pay part of this fee. The cost of your attorney and/or the seller’s attorney may also appear here. If an attorney's involvement is required by the lender, the fee will appear on this part of the form, or on lines 1111, 1112 or 1113.
  • 1108. Title Insurance: The total cost of owner's and lender's title insurance is shown here.
  • 1109. Lender's Title Insurance: The cost of the lender’s policy is shown here.
  • 1110. Owner's (Buyer’s) Title Insurance: The cost of the owner's policy is shown here.


1101. Settlement or closing fee to

1102. Abstract or title search to

1103. Title examination to

1104. Title insurance binder to

1105. Document preparation to

1106. Notary fees to

1107. Attorney’s fees to

(includes above items numbers; )

1108. Title Insurance to

(includes above items numbers; )

1109. Lender’s coverage $

1110. Owner’s coverage $




1200. Government Recording and Transfer Charges

  • These fees may be paid by you or by the seller, depending upon your agreement of sale with the seller.
  • The buyer usually pays the fees for legally recording the new deed and mortgage (line 1201).
  • Transfer taxes, which in some localities are collected whenever property changes hands or a mortgage loan is made, can be quite large and are set by state and/or local governments. City, county and/or state tax stamps may have to be purchased as well (lines 1202 and 1203).


1201. Recording fees: Deed $ ; Mortgage $ ; Releases $

1202. City/county tax/stamps: Deed $ ; Mortgage $

1203. State tax/stamps: Deed $ ; Mortgage $



1300. Additional Settlement Charges

  • 1301. Survey: The lender may require that a surveyor conduct a property survey. This is a protection to the buyer as well. Usually the buyer pays the surveyor's fee, but sometimes this may be paid by the seller.
  • 1302. Pest and Other Inspections: This fee is to cover inspections for termites or other pest infestation of your home.
  • 1303-1305. Lead-Based Paint Inspections: This fee is to cover inspections or evaluations for lead-based paint hazard risk assessments and may be on any blank line in the 1300 series.


1301. Survey to

1302. Pest inspection to




1400. Total Settlement Charges

  • The sum of all fees in the borrower's column entitled "Paid from Borrower's Funds at Settlement" is placed here. This figure is then transferred to line 103 of Section J, "Settlement charges to borrower" in the Summary of Borrower's Transaction on page 1 of the HUD-1 Settlement Statement and added to the purchase price.
  • The sum of all of the settlement fees paid by the seller are transferred to line 502 of Section K, Summary of Seller's Transaction on page 1 of the HUD-1 Settlement Statement.

1400. TOTAL SETTLEMENT CHARGES (enter on lines 103, Section J and 502, Section K)

Paid Outside Of Closing ("POC")

  • Some fees may be listed on the HUD-1 to the left of the borrower’s column and marked "P.O.C."
  • Fees such as those for credit reports and appraisals are usually paid by the borrower before closing/settlement. They are additional costs to you.
  • Other fees such as those paid by the lender to a mortgage broker or other settlement service providers may be paid after closing/settlement. These fees are usually included in the interest rate or other settlement charge. They are not an additional cost to you. These types of fees will not be added into the total on Line 1400.

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