Even if you haven't paid them, chances are you've heard of "closing costs" associated with buying a home. But what are mortgage closing costs? What do they mean? And why do you have to pay for them?
In short, when you “close” on the purchase of a property, ownership of that property is legally transferred to you, the buyer. More often than not, paying to purchase the property requires borrowing money from a bank in the form of a mortgage. Mortgage closing costs are those expenses that are required in order for the bank to originate the mortgage. These costs can vary, but they often equal between two percent and five percent of the purchase price. This means, if you're buying a home for $100,000, your mortgage closing costs could range between $2,000 and $5,000.
Prior to your closing, you will receive a closing disclosure statement with specific fees listed. Here are some of the fees you will likely see and what they mean: