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What Are Closing Costs?

Are you ready to buy a home and have heard about closing costs, but aren’t quite sure what they are?

Closing costs are the one-time fees you pay at the end of the homebuying process to officially transfer ownership and secure your mortgage. They typically include charges from your lender, third-party providers, and local government offices.

Typical closing costs usually range from 2% to 5% of the loan amount. Buyers typically pay most of the closing costs, but it’s sometimes possible to negotiate with the seller to cover some or all of them.

When you apply for your mortgage loan you will receive an estimate of what your closing costs will be, but the final amount could be slightly more or less than the estimate. You will receive the exact amount of your closing costs three days before your closing date.  

Closing costs are paid on closing day, usually by a cashier’s check or wire transfer.   

Some common items included in closing costs are:

  • Loan Origination Fee: Charged by your lender to process the loan
  • Appraisal Fee: Pays for a professional to determine your home’s market value  
  • Credit Report Fee: Covers the cost of checking your credit history
  • Title Search and Title Insurance: Ensures the home’s title is clear and protects you and your lender if issues come up later
  • Attorney Fees: For reviewing contracts and closing documents
  • Recording Fees: Paid to your local government for recording the property’s new deed
  • Prepaid Property Taxes and Homeowners Insurance: Collected up front to fund your escrow account
  • Prepaid Interest: Covers interest from your closing date until your first mortgage payment
  • Home Inspection Fee: Pays for an inspection of the home before you buy

Your realtor or lender may recommend a closing agency to you, but you are free to use any agency you choose.

Understanding closing costs helps you plan ahead and avoid last-minute surprises when buying or refinancing a home.

Eastman Credit Union provides closing services for all individuals and lenders via ECU Title & Escrow (ECUTE). ECUTE is a full-service real estate settlement company that provides the option to complete the home-buying process at an ECU branch, making the entire process as convenient, comfortable, and timely as possible. You can learn more by visiting ecu.org/ecutitle or calling 423-230-3399.

ECU also offers a variety of mortgage products to fit your budget and lifestyle. To learn more, visit ecu.org/mortgage.