Closing costs refer to the fees and expenses incurred during the purchase or sale of a property, typically paid at the closing or settlement of the real estate transaction.
These costs can vary widely depending on the location, the value of the property, and specific agreements between the buyer and seller. Closing costs may include, Fees for loan origination, appraisal, title insurance, attorney services, inspections, recording fees, taxes, and more.
They are usually expressed as a percentage of the total purchase price of the property and are paid by both the buyer and seller unless otherwise negotiated.
For a house sold at $200,000, here are the typical fees included in the property closing costs, along with detailed descriptions and estimations for each:
- Loan Origination Fees: This fee is charged by the lender for processing the loan application. It typically ranges from 0.5% to 1% of the loan amount. Estimation: $1,000 to $2,000.
- Appraisal Fees: This fee covers the cost of having the property appraised to determine its market value, which is required by the lender. Estimation: $300 to $600.
- Credit Report Fees: This fee is for obtaining your credit report to assess your creditworthiness. Estimation: $25 to $50.
- Title Insurance: This insurance protects the buyer and lender against potential disputes over property ownership. It ensures the title is clear of any liens or encumbrances. Estimation: $500 to $1,500.
- Title Search Fees: This fee is for searching public records to verify the property's legal ownership and check for any liens or claims. Estimation: $200 to $400.
- Attorney Fees: If applicable, this fee covers legal services provided by a real estate attorney who reviews the closing documents. Estimation: $500 to $1,500.
- Survey Fees: This fee is for having a survey done to determine the property's boundaries and identify any encroachments. Estimation: $300 to $500.
- Home Inspection Fees: This fee covers a professional home inspection to assess the condition of the property. Estimation: $300 to $500.
- Property Taxes: These are prorated property taxes that the buyer needs to reimburse the seller for any taxes already paid. The amount varies based on local tax rates and the closing date. Estimation: Around $1,000 (prorated).
- Recording Fees: This fee is for recording the new deed and mortgage with the local government. Estimation: $50 to $150.
- Transfer Taxes: These taxes are imposed by the state or local government on the transfer of property ownership. Estimation: 0.1% to 2% of the property value. Estimation: Around $1,000 (0.5% of $200,000).
- Prepaid Interest: This covers the interest that accrues between the closing date and the first mortgage payment. Estimation: $100 to $500.
- Homeowners Insurance: Lenders typically require the first year of homeowners insurance to be paid in advance at closing. Estimation: $500 to $1,200 per year.
- Private Mortgage Insurance (PMI): If the down payment is less than 20%, PMI is required to protect the lender. It is typically 0.3% to 1.5% of the original loan amount per year. Estimation: Around $600 annually.
- Escrow Fees: This fee covers the escrow service that handles the transfer of funds and documents between the buyer and seller. Estimation: $500 to $1,500.
- HOA Fees: If the property is part of a Homeowners Association, there may be fees for transferring ownership and prepaid dues. Estimation: $200 to $1,000.
- Points: Optional fees paid to the lender at closing in exchange for a reduced interest rate. One point equals 1% of the loan amount. Estimation: $2,000 per point for a $200,000 loan (if applicable).
Summary of Estimated Costs:
- Loan Origination Fees: $1,000 to $2,000
- Appraisal Fees: $300 to $600
- Credit Report Fees: $25 to $50
- Title Insurance: $500 to $1,500
- Title Search Fees: $200 to $400
- Attorney Fees: $500 to $1,500
- Survey Fees: $300 to $500
- Home Inspection Fees: $300 to $500
- Property Taxes: Around $1,000
- Recording Fees: $50 to $150
- Transfer Taxes: Around $1,000
- Prepaid Interest: $100 to $500
- Homeowners Insurance: $500 to $1,200
- Private Mortgage Insurance (PMI): Around $600 annually
- Escrow Fees: $500 to $1,500
- HOA Fees: $200 to $1,000
- Points: $2,000 per point (if applicable)
Total Estimated Closing Costs:
- Without points: Approximately $9,880 to $11,880
- With one point: Approximately $11,880 to $13,880
These are rough estimates, and actual costs can vary. Always get detailed quotes and disclosures from your Realtor, Lender, and Title companies.
Residential&Commercial Real Estate Advisor
Texas Board of Professional Geoscientists (TBPG)
