I remember the first time I sat in a title company's office, closing on my first house. The excitement and sense of accomplishment were feelings I will not soon forget (even though this was over 10 years ago.)

As a first time home buyer, I felt prepared... I had done my research and made a spreadsheet, after all. Our monthly income minus our monthly payments (PMI and insurance included) was something we were ready to take on. We were confident in our finances. But then, a few days prior to closing, we received our settlement disclosure paperwork. For those unaware, this is the paperwork that breaks down every dollar of the transaction. What the seller pays and what the buyer pays. As I sat down to go over the ins and outs, I couldn't help but wonder... "what in the world were all of these charges??" I knew we were going to need a cashier's check to cover our down payment, but I had not, at all, planned for the extra closing costs! I started to panic. Could we really afford this??

In the end, we did. We moved some money around and closed on our first home with no issues. Looking back, I wish that someone had better informed us in what to expect. It would've saved me a lot of stress and tears... and my husband a lot of his sanity having to deal with my anxiety. Which is why, I want to make sure that you are better informed than I was. I want you to walk into that closing with full confidence, knowing that there will be no financial surprises! So, let's talk about those closing costs, shall we?

Thanks to HouseLogic.com and REALTOR® Magazine, here is a breakdown of the closing costs typically paid for by the buyer:

#1 Home Inspection

A home inspection helps protect you from purchasing a home that could be a lemon. So you don't want to forgo it.Your inspector isn't required to be an expert in everything. If you suspect termites, asbestos, and foundational issues, for instance, you'll need to hire a specialist. Inspectors will look for signs of structural issues, mold, and leaks; assess the condition of the roof, gutters, water heater, heating and cooling system; and more. Inspections cost between $300 and $500, and whether or not you end up purchasing the property, you still need to pay this fee. 

#2 Appraisal Fee

This appraisal report goes to your lender to assure it that the property is worth what you're paying for it. This report worked in our favor a couple of years ago when our home came back appraised for $10,000 less than our bid; the sellers had to reduce their asking price in order to move forward.  An appraisal can take about 2 hours and costs between $200 and $425.

#3 Application Fees

Before ever approving you for a loan, the lender is going to run your credit report and charge you an application fee, often lumping the credit report fee in with the application fee. This can run $75 to $300. Be sure to ask for a breakdown of the application fees to understand all costs.

#4 Title Services

These fees cover a title search of the public records for the property you're buying, notary fees for the person witnessing your signature on documents, government filing fees, and more. These can cost between $150 and $400, and it's important to get a line item for each cost.

#5 Lender's Origination Fees

Your lender will charge you this upfront free for making the mortgage loan. This includes processing the loan application, underwriting the loan (researching whether to approve you), and funding the loan. These fees are quoted as a percentage of the total loan you're taking out and generally range between 0.5 to 1.5%.

#6 Survey Costs

This report ($150 to $400) confirms the property's boundaries, outlining its major features and dimensions.

#7 Private Mortgage Insurance (PMI)

When you put down less than 20% on your new home, the lender requires that you purchase   PMI,  which is a policy that protects the lender from losing money if you end up in foreclosure. So PMI is a policy that you have to buy to protect the lender from you. PMI rates can vary from 0.3% to 1.5% of your original loan amount annually.

#8 Tax Service Fee

This is the cost (about $50) to ensure that all property tax payments are up to date and that the payments you make are appropriately credited to the right home.

Always ask questions when it comes to understanding the fees you're paying. If possible, print out documents and go through them with a highlighter to indicate any areas you have concerns about. Discuss them with your lender or real estate agent and determine if you can negotiate any of them down.

Some costs that are not talked about in the referenced article are your pro-rated charges (insurance, taxes, HOA, etc...) These costs are unique to every home sale, so generic estimations are not possible. To get an accurate estimate of ALL your closing costs, you will need to consult your real estate agent, loan officer, insurance provider and/or title company officer!

If you found this information useful, please consider sharing it with your family and friends. And if you have any further questions, don't hesitate to contact me. This is what I am here for :).

For the full article from HouseLogic.com, click here.