Closing Costs

AAA

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."

INVESTOPEDIA EXPLAINS '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.

VIDEO

Loading the player...
RELATED TERMS
  1. Dry Closing

    A type of real estate closing in which the entire closing requirements ...
  2. Tax Service Fee

    A legitimate closing cost used to ensure that mortgagors pay ...
  3. Origination Points

    A type of fee borrowers pay to lenders or loan officers in order ...
  4. Home-Equity Loan

    A consumer loan secured by a second mortgage, allowing home owners ...
  5. Good Faith Estimate

    An estimate of the fees due at closing for a mortgage loan that ...
  6. Down Payment

    A type of payment made in cash during the onset of the purchase ...
RELATED FAQS
  1. Why can real estate be a good addition to a traditional stock and bond portfolio?

    Real estate can be a good addition to a traditional stock and bond portfolio because it offers diversification. Real estate ... Read Full Answer >>
  2. When should a real estate broker release earnest money deposit funds?

    As soon as an agent or broker accepts an earnest money deposit, he becomes an escrow agent. This means that, in most cases, ... Read Full Answer >>
  3. Where does the term "always be closing" come from?

    The exact origin of the sales phrase "always be closing" is unknown, but it was newly popularized by its usage in the 1992 ... Read Full Answer >>
  4. How do earnest money deposits work in a short sale?

    Earnest money is required in a short sale transaction, although the funds do not necessarily have to be deposited into an ... Read Full Answer >>
  5. What is a fiduciary deed and when is it useful?

    A fiduciary deed is used to transfer property rights in a sale when a fiduciary must act as an executor of the sale on behalf ... Read Full Answer >>
  6. Why does the loan-to-value ratio matter?

    For mortgage lenders and borrowers, the loan-to-value ratio is an important factor in determining the repayment terms of ... Read Full Answer >>
Related Articles
  1. Budgeting

    Will You Break Even On Your Home?

    Calculate how much your property will need to appreciate to cover the costs of owning it.
  2. Personal Finance

    To Rent Or Buy? There's More To It Than Money

    Your lifestyle, level of commitment and the trade-offs need to be carefully weighed.
  3. Home & Auto

    To Rent Or Buy? The Financial Issues

    Thinking of buying a home? We look at the initial and ongoing costs, as well as the so-called benefits.
  4. Taxes

    Will Your Home Sale Leave You With Tax Shock?

    Learn how the newest tax laws apply to the proceeds you earn.
  5. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  6. Credit & Loans

    House Price Vs. Interest Rate: Which Is More Important?

    Deciding which factor is more important can make a difference in monthly payments, ability to move and Homowners Association fees.
  7. Home & Auto

    Watch Out For "Junk" Mortgage Fees

    So many fees are tacked on to a mortgage, that it's easy to pay more than you have to.
  8. Options & Futures

    Score A Cheap Mortgage

    Hidden costs can create what looks like a good deal. Find out how to find the best mortgage possible.
  9. Home & Auto

    Real Estate Vs. Stocks: Which One's Right For You?

    There are ups and downs for both real estate and stock investments, so before diving in, know the differences between the two.
  10. Options & Futures

    Housing Deals That Fall Through

    Find why buyers back out and what you can do if you're left holding the bag.

You May Also Like

Hot Definitions
  1. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  2. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  3. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  4. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  5. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  6. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
Trading Center