What are closing costs? Part 2: Non-Recurring Closing Costs
Part 2 in our series on closing costs covers the second part of buyer’s closing costs: Non-Recurring Closing Costs. This series is prefaced with the fact that many closing costs are negotiable and customary costs can differ from city to city. This series is a general overview of what to expect at the closing table. To learn about recurring closing costs visit “What are closing costs? Part 1: Recurring Closing Costs”
Non-recurring closing costs are paid as part of the home buying process and are one-time charges.
These fees include but are not limited to:
- Loan Origination Fee
- Lender Processing Fee
- Credit Report
- Loan Application Fee
- Document Preparation Fee
- Flood Certification
- Woodstove exemption
- Escrow Fee*
- County/Local Transfer Fee*
- HOA Transfer Fee* (May not be applicable)
- HOA Document Preparation Fee (May not be applicable)
- Wire Fees
- Title Insurance Policy
- Escrow Processing Fee/Doc Prep
- Home Warranty* (Not required)
*Denotes payor of fee can be negotiated between buyer and seller prior to offer acceptance even if it isn’t customary for the area.
While many of the fees above are negotiable it may not be in your best interest to push too hard on fees that are typically paid by the buyer as your actions could cause a seller to reject your offer.
As with recurring closing costs, each transaction is different and your total costs may change depending on the property you purchase and what is customary to your area. For example, the seller of a property typically pays for the part of the escrow fee but on a HUD REO the owner, HUD, will not pay this fee so it turns into a buyer’s closing cost.
For general reference, the combination of your recurring and non-recurring closing costs should total between 3-3.5% of your purchase price. The amount may vary when you start adding in discount points to buy down the rate, additional inspections, wide coverage home warranties, additional insurance for pools, etc.
To get a more detailed look at your potential closing costs contact your lender or real estate agent and ask for a Good Faith Estimate or Estimate Net Sheet.
Check back for Part 3: The Bottom Line
To reduce liability from the sue happy: This is not intended to be a complete list of your closing costs. Your actual fees may be different as negotiated in your contract. Read your Purchase agreement and your lender’s documents carefully and make sure you understand the terms. You’re advised to consult legal counsel, a CPA, or financial advisor.