What is Included in Closing Costs

By: Horizon Bank Last Updated: August 25, 2011

closing-costsYou submitted your mortgage application and received a Good Faith Estimate (GFE) listing the charges, or closing costs, that you will incur at settlement. As a first time homebuyer, you may have some questions about the fees you have to pay – where did these charges come from, and what is included in closing costs?

Closing Costs include fees from your lender and third party service providers and are usually 3 to 5 percent of the price of your home. To help you better understand what you’ll pay, we’ve outlined the main fees associated with closing costs:

  • Loan Origination Fees – This fee includes the costs incurred for processing your loan and preparing documents for settlement.
  • Appraisal Fees – Your lender will charge you to have an appraiser come out to estimate the value of your new home.
  • Title Insurance – Title insurance protects the lender from any mistakes made during the title search such as missed existing liens on the property. Credit Report – Your lender is charged for checking your credit and this expense is passed on to you at settlement.
  • Property Taxes – Prepaid property taxes as well as transfer taxes are often charged at closing.
  • Homeowner’s Insurance – You are required to purchase homeowner’s insurance to cover the costs of potential hazards such as fire and vandalism.

Closing costs quickly add up, which is why it’s essential to choose a high quality mortgage lender that will ensure that you are charged fairly. You can make your first mortgage closing a success by reviewing the source of fees as well as implementing money saving strategies.