What Are Closing Costs?

All fees associated with buying a house can vary geographically - even in DC, Maryland and Virginia. Some common closing costs you can expect to see are:

Appraisal Fee: This fee pays for the appraisal of the property. You may already have paid this fee at the beginning of your loan application process.

Credit Report Fee: This fee covers the cost of the credit report requested by the lender. This too may already have been paid when you applied for your loan.

Loan Origination Fee: This fee covers the lender's loan-processing costs. The fee is typically one percent of the total mortgage.

Loan Discount: You will pay this one-time charge if you have chosen to pay points to lower your interest rate. Each point you purchase equals one percent of the total loan.

Title Fees: These fees generally include costs for the title search, title examination, document preparation and other miscellaneous title fees.

Title Insurance: Title insurance protects against any unrecorded or unknown defects in the title. Should there be a property owner who had rights to the property but it was sold without their knowledge and consent, this could be a title issue that may result in you having to defend your right ot ownership. Title Insurance protects against this by fighting this claim on your behalf should there be a question or cloud on the title.

PMI Premium: If you buy a home with a low down payment, a lender usually requires that you pay a fee for mortgage insurance. This fee protects the lender against loss due to foreclosure. Once a new owner has 20 percent equity in their home, however, he or she can normally apply to eliminate this insurance.

Prepaid Interest Fee: This fee covers the interest payment from the date you purchases the home to the date of your first mortgage payment. Generally, if you buy a home early in the month, the prepaid interest fee will be substantially higher than if you buy it towards the end of the month.

Escrow Accounts: In locations where escrow accounts are common, a mortgage lender will usually start an account that holds funds for future annual property taxes and home insurance. At least one year advance plus two months worth of homeowner's insurance premium will be collected. In addition, taxes equal approximately to two months in excess of the number of months that have elapsed in the year are paid at closing. (If six months have passed, eight months of taxes will be collected.)

Recording Fees and transfer taxes: This expense is charged by most states for recording the purchase documents and transferring ownership of the property. Your lender will give you an estimate of these costs, but here are some of the basics:

DC Recordation and Transfer Taxes:
DC Transfer Taxes and DC Recordation Taxes are either 2.2% or 2.9% depending on price point, split in half, and typically shared between the buyer and seller.

1.1% (each side pays) below $400,000
1.45% (each side pays) above $400,000
First time DC Buyers are currently eligible for a substantial credit on their recordation taxes, reducing it to .75% provided they meet income and purchase price requirements.

VA Recordation and Transfer Taxes:
1% transfer tax paid by seller
In the Northern Virginia region, the Commonwealth levies an additional grantor's tax of $0.15 per $100 of the sales price or fair market value of the property. The seller usually pays this tax if applicable.
State, County/City Transfer Tax and the State, County/City Mortgage Tax - buyer pays

MD Recordation and Transfer Taxes:
Recordation tax - $4.10 per $500.00
Transfer tax is at the rate of .5%, unless they are a first-time Maryland home buyer purchasing a principal place of residence

To get a more specific idea of closing costs, you can set up an account with one of our preferred Title Companies, Blue Note Title to perform your own calculations.