What Are Closing Costs?

Closing costs are the expenses over and above the price of the property in any real estate transaction. There are lender fees associated with acquiring a loan to purchase a property.

  • Origination: The closing costs that the lender and any mortgage broker charge the borrower for making the mortgage loan.
  • Points: Points are a percentage of a loan amount. For example, when a loan officer talks about one point on a $100,000 loan, this is one percent of the loan, which equals $1,000.
  • Underwriting: Paid to the lender, this fee covers the cost of researching whether or not to approve you for the loan.
  • Appraisal: This charge pays for an appraisal report made by an appraiser.
  • Credit report: This fee covers 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.
  • Flood determination: These closing costs are paid to a third party to determine if the property is located in a flood zone. If the property is found to be located within a flood zone, the buyer will be required to buy flood insurance. The insurance is paid separately.
  • Home inspection: Fee to verify the condition of a property and to check for home repairs that may be needed prior to closing.
  • Pest inspection: This fee is to cover inspections for termites or other pest infestation of the property.
  • Survey: The lender may require that a surveyor conduct a property survey. This is a protection to the buyer as well.
  • Title insurance binder: Commitment to issue a title insurance policy at future date. Blue Ink Original does not charge this fee, so if the borrower chooses Blue Ink Original, the lender may not charge this fee.
  • Lender’s title insurance: The cost of the lender’s policy, which protects the lender’s investment.
  • Mortgage insurance premium: The lender may require payment of the first year’s mortgage insurance premium or a lump sum premium that covers the life of the loan, in advance, at the settlement.
  • Prepaid interest: This is money paid at closing in order to get the interest paid up through the first of the month.

In addition to lender fees, or in the case of a cash purchase, there are additional closing costs to be considered:

  • Title insurance binder: Commitment to issue a title insurance policy at future date. Blue Ink Original does not charge this fee.
  • Owner’s title insurance: The cost of the owner’s policy, which protects the homeowner’s investment for as long as they, or their heirs, own the property.
  • Settlement: These closing costs are paid to the settlement agent for conducting the closing.
  • Title search: The fee to search the public records in the city/county of the property.
  • Document preparation: This fee covers the cost of preparation of final legal papers, such as a mortgage, deed of trust, note or deed.
  • Notary: These closing costs are charged for 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. Blue Ink Original does not charge a notary fee.
  • Recording fees: These closing costs are a fee paid to the city or county to record documents such as the deed.
  • Grantor tax: This tax is collected by some localities whenever a property changes hands.
  • Copy fee: This closing cost is a fee charged for the cost of making copies of the settlement paperwork. Blue Ink Original does not charge a copy fee.
  • Wire fees: This fee is charged for the cost of sending and receiving wired funds. Blue Ink Original does not charge a wire fee.
  • Homeowner’s insurance premium: This insurance protects the buyer 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.
  • Property taxes: Usually six months of county property taxes.
  • Home warranty: Fee for an insurance policy to protect you from the cost of unexpected failures to the major systems and appliances in your home.
  • Real estate commission: This is the total dollar amount of the real estate broker’s sales commission. This commission is typically a percentage of the selling price of the home.

Who Pays What?

The borrower/buyer pays lender fees and generally pays most of the closing costs listed above with exception of those fees generally paid by the seller specifically, real estate commission, grantor tax, and the seller’s settlement fee. However, this is negotiable and determined by the sales contract. Work with your realtor to generate and negotiate a contract that best suits your needs.

Most closing costs, other than recording and taxes, are negotiable and can be shopped for. Be certain to shop and discuss all fees with lenders and settlement companies. Blue Ink Original offers competitive pricing and some fees, as noted above, are not charged. Call or email us and we will happily provide you with our fees and answer any questions you may have.