Buyers Closing Costs & Prepaids

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  • Buyer's closing costs and “prepaid” expenses are paid at the time of closing and vary considerably. We look at the typical costs you’ll be responsible for paying.

    Closing Costs & Prepaid Expenses

    • Credit report. Lenders will pull a “tri-merge” report from all three credit bureaus.
    • Appraisal. Some lenders charge this at time of appraisal instead of at closing.
    • Origination fee. Some lenders charge a fee for the loan (usually 1% of loan amount.)

    Ask your lender about “buying down” your interest rate. This is an additional cost to get a better interest rate.

    • Underwriting fee. Covers the lender’s verification of information you provide them and whether your application meets the loan requirements.
    • Document preparation. Charged by most lenders.
    • Prepaid interest. Lenders charge you for interest incurred from the close date until the end of that month.  The later in the month you close, the less you’ll pay in prepaid interest.
    • Lenders title insurance policy. To ensure your lender that you get free and clear title to the property.
    • Flood zone certification. To verify whether or not you’re in a flood zone.

    The cost of inspections is usually NOT included in your buyers closing costs. Those are paid at time of service.

    • Escrow or closing fee. For the handling of closing documents, payoff of sellers mortgage, handling buyer and seller funds, recording of the sale.
    • Prepaid property taxes. Your lender will usually collect up to 12 months worth of property taxes.
    • Homeowners insurance. Lenders require insurance to protect their investment.
    • Recording fees. For filing the official transfer of the property into your name with the county, township or local authority.
    • Excise fee or transfer tax. Some areas charge a tax or fee on sale of real estate.

    How Much Money do I Need to Buy a House gives specific cost breakdowns for you.  Also, your Mortgage Professional will provide you with an Initial Fees Worksheet or a Good Faith Estimate so you can compare the closing costs of different types of loans.

    See our Lesson Getting the Seller to Pay Closing Costs to learn how to save on expenses.

    Thinking of buying a home in the Portland, Oregon area? Checkout our First Time Home Buying Classes!

    Buyers Closing Costs & Prepaids was last modified: May 1st, 2018 by David Axness

    Choose a state from the drop-down menu for specific state information related to this lesson.

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    1. […] you can see, prepaids and closing costs are very different. However, with both it is important to be prepared to pay at […]

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