Closing Costs Explained

Closing costs are are fees - charged by lenders and third parties - related to the purchase of the home. For the majority of loan types (though not all) buyers pay these closing costs. The closing costs can be negotiated to have the seller contribute to or pay for specific fees, but in Los Angeles, in today's market, this is not a frequent practice.

So, what are these fees and how much will they cost? Examples can include:

• A fee for running your credit report

• A loan origination fee, which lenders charge for processing the loan paperwork for you. This can vary significantly and is a question you can ask about prior to selecting a lender.

• Home inspection fees.

• Discount points, which are fees you pay in exchange for a lower interest rate.

• Appraisal fee.

• Survey fee, which covers the cost of verifying property lines.

• Title insurance, which protects the lender in case there are any uncertainty about the title of the property.

• Title search fees, which pay for a background check on the title to make sure there aren't things such as unpaid mortgages or tax liens on the property.

• Escrow deposit, which may pay for a couple months' property taxes and private mortgage insurance.

• Pest inspection fee.

• Recording fee, which is paid to a city or county in exchange for recording the new land records.

• Underwriting fee, which covers the cost of evaluating a mortgage loan application.

Prior to closing you will receive an estimated closing statement from the escrow company, that will outline all specific costs and provide a total of the cash required to 'close' at the end of the loan and purchase process.

It's recommended to expect, and set aside (in extra cash in hand) approximately 1% - 3% of the purchase price of the home for these various costs.

**This information is provided as an example - individual loans will have varying fees and costs. Check with your lender for exact details.