ABA Family Legal Guide

Buying and Selling a Home

The Steps of Buying and Selling a Home

Closing Costs

How much will I need for closing costs?

In addition to the down payment, the buyer will need to pay for closing costs. These costs vary depending on local custom and the specific terms of the purchase agreement. If you are obtaining a loan, the law requires the lender to provide an estimate of these costs as part of the loan application process.

Closing costs usually include all or most of the following:

Appraisal fee

This is the fee paid for an appraisal of the property. It is required by the lender and is often paid for by the borrower. The Federal Housing Administration and the Veterans Administration establish the appraisal fees for mortgages that they guarantee.

Lawyer's fee

Buyers and sellers pay the fees for their own lawyers. In some states, buyers are required to pay for the lender's lawyer. This fee may be a certain percentage of the mortgage or a fixed fee.

Survey fee

The contract should specify whether the seller is obligated to provide a survey. If the seller is not, the buyer may need to obtain and pay for a survey, for his or her own use and to satisfy the lender. You may be able to avoid this fee if the lender agrees to accept a recent survey done for the seller, along with an affidavit by the seller stating that the property lines have not changed since the completion of the survey and that there have been no additional improvements to the property since the survey was taken. In addition, the title company may perform a visual inspection of the property to verify the seller's statements. Even then, a title insurance company may require a new survey unless the survey has been recertified recently.

Loan discount fee

This is the lender's charge to the buyer to obtain the loan, sometimes referred to as points or the loan origination fee. The buyer may have paid some of this fee in advance to secure the loan.

Inspection fees

These are charges for general inspections or inspections required by local laws. The buyer or the seller may be responsible for these fees, depending on the contract and local law and custom.

Title fees

These fees cover the cost of the title search.

Title insurance

The contract needs to spell out who is to pay the cost of title insurance. Often, it is divided between the seller and the buyer. In some states, the seller pays for the buyer's policy and the buyer pays for the lender's policy. In other states, the buyer pays all charges related to title insurance.

Transfer taxes

These taxes are imposed by the state, county, or city where the property is located on the transfer of the deed and, in some cases, on the mortgage.

Recording fees

The costs of recording the deed in order to change ownership and recording the buyer's mortgage are paid by the buyer. The cost of recording the release of the seller's mortgage by the seller's lender and recording the release of any other liens found in the record of title are paid by the seller.