Buying a Home: The Missing Manual

Chapter 9. Know Your Closing Costs

It’s as certain as death and taxes: Whenever a piece of real estate changes hands, money changes hands, too. The swap takes place at an event called the closing, a meeting of all the parties involved in the sale of a house (the lender’s attorney, the owner’s representative, and you and/or your representative). There, you sign a dauntingly large stack of papers that bind you to the terms of your mortgage and make the property transfer official. Then you review the closing costs (sometimes called settlement costs), the fees and charges involved in the sale. There’s quite a list of them; you pay some and the seller pays others. (Chapter 13 gives you a step-by-step tour of a real estate closing so you know what to expect.)

Closing costs can add up fast, but lenders provide you with an estimate of them beforehand. So you’ll have an accurate list of the costs you can use to plan ahead. In this chapter, you’ll get an overview of the different kinds of closing costs: those related to your mortgage, those related to the property transfer, and those that go to the government. You’ll also see how these costs add up at a typical closing—and get tips for keeping them to a minimum.

Kinds of Closing Costs

Closing costs fall into three categories:

• Costs related to getting your mortgage

• Costs related to transferring ownership of the property

• Government taxes and fees

Tip

Take closing costs into account when you decide what to offer for a home. And remember that many of ...