Closing Costs

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DEFINITION of 'Closing Costs'

The expenses, over and above the price of the property that buyers and sellers normally incur to complete a real estate transaction. Costs incurred include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed-recording fees and credit report charges.

Also known as "settlement costs."

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BREAKING DOWN 'Closing Costs'

Closing costs are separated into two categories: nonrecurring closing costs and prepaid costs. Nonrecurring costs are one-time costs associated with buying a property or obtaining a loan. Prepaid costs are those that recur over time, such as property taxes and homeowners' insurance. These costs are estimated by the lender on what is called a "good-faith estimate", which the lender must issue to the borrower within three days of a home loan application.

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