What happens at closing?
Closing (also called settlement) is the final step of buying and financing a home. Ownership officially transfers to you, the loan funds, and everyone involved signs the required documents. The meeting typically lasts an hour or two and is usually run by a title company or closing attorney.
Government (statutory) costs
- Transfer taxes charged when the title and deed change hands
- Deed recording fees paid to the county clerk
- Prorated property taxes, split between buyer and seller based on how many days each owns the home during the tax period
- State and local fees tied to the mortgage itself
Third-party costs
- Attorney or settlement agent fees
- Title search and title insurance, which verify the seller can legally transfer clear ownership
- The first year of homeowners insurance, usually paid before closing
- Real estate commissions, typically paid by the seller
Other up-front expenses
- Home inspection and appraisal fees
- Prepaid interest covering the days between funding and your first payment
- Initial escrow deposits for taxes and insurance
- Repairs or items negotiated with the seller
- Moving expenses
What is RESPA?
The Real Estate Settlement Procedures Act is a federal law that requires lenders to give you a Loan Estimate within three business days of your application, detailing the expected costs of your loan, and a Closing Disclosure at least three business days before closing. Compare the two carefully. Most fees can't change at all, and others can only change within set limits.