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Buying a Home: What is Closing Cost?


When diving into the realm of homeownership, understanding closing costs is crucial. Let's demystify this essential aspect of home buying.  The are two components to closing cost, non-recurring cost, and recurring cost.

Non-Recurring Closing Costs:

Non-recurring closing costs are one-time charges for services used in purchasing a home. Here's a breakdown of common non-recurring fees incurred by buyers:

  • Escrow Cost

  • Title Fees

  • Lender Underwriting Fee, Administrative Fee, Origination Fee

  • Notary Fee

  • Recording Fee

  • Points

  • VA Funding Fee

  • FHA Upfront Mortgage Insurance

  • Cost of Inspection & other Services the Buyer Chooses to Pay Through Escrow

  • HOA Transfer Fee

  • County Transfer Tax

  • City Transfer Tax

  • Private Transfer Fee

Recurring Closing Costs:

These charges are part of owning a home or obtaining a mortgage, prepaid at closing but recurring in the future. Some common recurring fees include:

  • Property Taxes

  • Homeowner Insurance

  • Interest (called Pre-Paid Interest)

  • Private Mortgage Insurance

  • HOA Dues

Cash Needed to Buy A Home:

It's recommended that buyers have at least 7% of their home's cost available in cash or accessible funds. This allocation typically includes:

  • At least 3% for the down payment

  • 2% to 3% for closing costs

  • 0.5% to 2% for moving expenses and unforeseen fees

Navigating the Closing Process:

Your loan officer should give you details of your closing costs twice during the home-buying journey. These details come in the form of an Estimated Closing Statement, provided shortly after entering a contract to purchase a home and again before closing. It's essential to review both estimates carefully, as discrepancies could signal a violation of lending rules.


While this article briefly overviews closing costs, there's much more to explore. Remember the importance of having sufficient cash reserves for your down payment, closing costs, and moving expenses. Pay close attention to your Estimated Closing Statement as you move closer to securing your dream home. Happy house hunting!

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