Closing Costs

What Happens at Closing?

Closing (also called settlement) is the meeting where ownership officially transfers and your loan is finalized. It's usually handled by a title company, closing attorney or escrow officer.

At least three business days before closing you'll receive your Closing Disclosure, a five-page form showing your final loan terms and costs. Compare it with your Loan Estimate and ask about anything that changed.

At the closing itself, you'll bring a photo ID and your funds (usually by wire transfer or cashier's check), review and sign the loan documents and deed, and get your keys once everything is recorded. Always call your title company at a known phone number to confirm wire instructions. Wire fraud is real.

Plan on about an hour to sign everything. Take your time and ask questions. The closing agent can explain each document, and I'm always available by phone if anything looks different than you expected. Before closing day, do a final walk-through of the home to make sure it's in the condition you agreed on.

Statutory Closing Costs

Statutory costs are fees required by state or local government. They vary a lot depending on where you live. Common examples include:

• Recording fees to officially record the deed and mortgage with the county
• Transfer taxes charged when property changes hands
• Mortgage or intangible taxes that some states charge on new loans

Your Loan Estimate lists these under "Taxes and Other Government Fees."

Third-Party Costs

These are paid to companies other than your lender for services needed to complete the loan:

• Appraisal: an independent estimate of the home's value
• Credit report fee
• Title search and title insurance: protects you and the lender against ownership problems
• Settlement or closing fee: paid to the title or escrow company
• Survey and pest inspection, when required
• Flood certification

You can shop for some of these services. Your Loan Estimate will tell you which ones.

Other Up-Front Expenses

Besides fees, you'll pay some items in advance at closing. These are called prepaids and escrow deposits:

• Prepaid interest from your closing date to the end of the month
• Homeowners insurance premium for the first year
• Escrow deposits for future property taxes and insurance
• Lender fees such as origination or underwriting fees
• Discount points, if you choose to buy down your rate
• HOA transfer fees or dues, if the property is in an association

Remember, sellers can often contribute toward your closing costs, and lender credits or gift funds can also help.

Your closing date can affect how much cash you need. Closing near the end of the month usually means less prepaid interest, while closing early in the month means more. Your first mortgage payment is typically due on the first day of the second month after closing.

What Is RESPA?

The Real Estate Settlement Procedures Act (RESPA) is a federal law that protects homebuyers during the closing process. It requires lenders to give clear, timely disclosures about costs. It bans kickbacks and unearned referral fees between settlement service providers, limits how much a lender can require you to keep in your escrow account and says you can't be forced to use a specific title company chosen by the seller.

Along with the TILA-RESPA Integrated Disclosure rule, RESPA is why you receive your Loan Estimate within three business days of applying and your Closing Disclosure three business days before closing. These protections help you compare offers and avoid surprises.