What is the purpose of closing costs?

On Behalf of | Jan 30, 2021 | Real Estate

During your search for a new home in Florida, you may have encountered the term “closing costs.” If you have never before heard of this, you may wonder how it relates to your purchase and why it is necessary.

Closing costs are a series of fees that correlate with the transferal of property from the seller to you, the buyer. You could pay these charges, you could negotiate to have the seller pay these charges or both parties could pay for certain costs.

Aspects of closing a sale

Your closing process could look different from others depending on the contractual obligations you have. Each of the costs associated with closing should have a place in your contract so you can formally agree to their payment. According to Zillow, some of the costs associated with closing a real estate sale include the following:

  • Home inspection fee to verify the condition of the property
  • Underwriting fee for a lender to verify your loan eligibility
  • Appraisal fee to determine the home’s fair market value
  • HOA transferal fees and applicable homeowners insurance fees
  • Private Mortgage Insurance if your down payment is less than 20% of the home’s value

Your responsibility

Before you pay any closing costs, you have the right to know what you are paying for. Ask for a breakdown of the closing costs. Depending on your situation, you can negotiate to have the seller absorb some of these costs to reduce the amount you owe.

Your payment of closing costs must precede the transfer of property into your name. Often, paying for closing costs is the final part of your journey to buy a new home.