Definition
Also referred to as settlement costs, the fees and other monies due at the time of a home's purchase are known as closing costs. These costs would not include the purchase price of the home, but those expenses associated with the legal transfer of the property and securing a loan.
Prior to a real estate closing, the lender or mortgage company will develop a "good faith estimate" of all costs.
Explanation
The settlement statement includes a summary of the money due and paid for by both the borrower and seller. This good faith estimate will contain categories of costs due at the closing, including:
Lender Fees: Origination fees, mortgage points, document preparation fees, overnight mailing services, and administrative costs.
Third Party Fees: Title search fees, title insurance, flood certification, surveying costs.
Attorney Fees: Document preparation, participation in meetings, standard fees to prepare documentation for a closing.
Government Fees: Recording of deeds, state and local mortgage taxes.
Escrow Account and Interest: Homeowner's insurance, real estate taxes held in escrow, private mortgage insurance, mortgage interest due up to the last day of the month.
Mortgage Points: Prepayment of interest on a loan, where one point is equal to one percent of the mortgage or loan.
