The Hidden Costs of Home Buying: Closing Costs Explained

By Misty Darling

Professional service with an emphasis on guidance, planning, and dedication to my clients’ needs are my top priority.

If you’re in the process of buying a house, you may have heard of the term “closing costs”, but what exactly are they? In short, closing costs are the various fees associated with finalizing a mortgage loan and transferring ownership of a property. Today, we’ll break down what you need to know about closing costs and how to navigate them.

Closing costs can vary depending on factors such as the location of the property, the type of loan you’re getting, and the lender you’re working with. However, in general, closing costs can be divided into two categories: hard costs and prepaid costs.

Hard costs refer to the specific fees that you’ll incur with a lender to do a loan, such as an appraisal or title work. These fees typically range from $2,000 to $3,000.

<div class="pullquote">“Closing costs are the various fees associated with finalizing a mortgage loan and transferring ownership of a property.”</div>

Prepaid costs, on the other hand, include expenses that you’ll have no matter which lender you work with, such as an escrow for taxes and insurance and your first year of homeowner’s insurance. These expenses can also be rolled into your closing costs, but it’s important to note that they are not fees that you pay to the lender directly.

When you receive a closing cost estimate from a lender, it’s important to understand that it may not be entirely accurate. In an effort to be more transparent, lenders are required to provide a disclosure form that outlines your estimated closing costs. However, this form can be complicated and may not always break down the costs in a clear and concise manner.

If you notice a big discrepancy between your estimated closing costs and your actual closing costs at the end, don’t worry—the lender is required to pay the difference. This is called a “cost to cure,” and it’s designed to protect borrowers from being taken advantage of by lenders.

Closing costs may seem overwhelming, but with a bit of knowledge and preparation, you can navigate them with ease. If you have any questions about closing costs or the homebuying process in general, don’t hesitate to reach out to us. We’d be more than happy to help.