When a buyer applies for a loan, lenders are required to
provide them with a good-faith estimate of their closing
costs. The fees vary according to several factors, including the
type of loan they apply for and the terms of the purchase
agreement. Likewise, some of the closing costs, especially
those associated with the loan applications, are actually paid
in advance. Some typical buyer closing costs include:
•• The down payment
•• Loan fees (points, application fee, credit report)
•• Prepaid interest
•• Inspection fees
•• Appraisal
•• Mortgage insurance (typically 1 years premium plus an escrow of 2 months)
•• Hazard insurance (typically 1 years premium plus an escrow of 2 months)
•• Escrow services
•• Title insurance
•• Recording Fees on the notes •• Broker’s commission


If the seller has not yet paid for the house in full, the seller’s
most important closing cost is satisfying the remaining
balance of their loan. Before the date of closing, the escrow
officer will contact the seller’s lender to verify the amount
needed to close out the loan. Then, along with any other
fees, the original loan will be paid for at the closing before
the seller receives any proceeds from the sale. Other seller
closing costs can include:
•• Broker’s commission
•• Excise / Transfer taxes
•• Documentary Stamps on the deed
•• Title insurance
•• Escrow Services
•• Property taxes (prorated)


In addition to the sales price, buyers and sellers frequently
include closing costs in their negotiations. For example, if a buyer
is particularly nervous about the condition of the plumbing, the
buyer may request the seller agree to pay for the house inspection.
Likewise, a buyer may want to save on up-front expenditures, and
so agree to pay the seller’s full asking price in return for the seller
paying all the allowable closing costs. There’s no right or wrong
way to negotiate closing costs; just be sure all the terms are
written down on the purchase agreement.


At the time of closing, certain costs are often prorated (or
distributed) between buyer and seller. The most common
pro-ration is for property taxes. Property taxes are typically paid at
a different time of year than the closing of the sale, for the year
they were assessed.