After successfully finding the perfect home, securing an accepted offer, and obtaining mortgage approval, the next goal for any buyer is to move in as quickly as possible. However, before the keys are handed over, there’s a critical step that often catches buyers off guard: the closing process. Also known as settlement, this is the pivotal moment when property ownership officially transfers from the seller to the buyer. For many, the complexity of closing—and the array of associated fees—can lead to confusion and frustration, especially when faced with unexpected costs amounting to thousands of dollars.

These expenses cover mandatory government charges and mortgage-related costs, which vary by location. Below are some of the most common and essential fees buyers should anticipate:

1. Appraisal Fee

This fee covers the professional assessment of the property’s value. Buyers may have already paid this during the initial loan application phase.

2. Credit Report Fee

Lenders require this fee to pull the buyer’s credit report. It is often paid during the loan application process.

3. Loan Origination Fee

Typically 1% of the loan amount, this fee compensates the lender for processing the mortgage.

4. Discount Points

Buyers who opt to pay discount points to secure a lower interest rate will incur this one-time charge. Each point equals 1% of the loan amount.

5. Title Insurance Fees

These fees cover the title search, examination, document preparation, and other related services to ensure the property’s legal ownership is clear.

6. Mortgage Insurance

Buyers with a down payment of less than 20% usually pay this insurance to protect the lender from potential title-related risks. Once the homeowner’s equity reaches 20%, this insurance can often be canceled.

7. Prepaid Interest

This fee covers the interest due from the closing date until the first mortgage payment. The amount varies depending on whether the closing occurs early or late in the month.

8. Escrow Account

Lenders may establish an escrow account to hold funds for future property taxes and homeowners insurance. Buyers typically prepay two months of insurance premiums at closing. Additionally, they must pay prorated taxes for the current year and set aside funds for upcoming tax payments.

9. Recording Fees and Transfer Taxes

Most states impose these fees to formally record the purchase documents and transfer property ownership.

Given the variability of closing costs, consulting a local real estate expert is essential. Understanding these expenses in advance allows buyers to budget accordingly and potentially negotiate with the seller to cover part or all of the fees, easing the financial burden. By being well-informed, buyers can navigate the closing process with confidence and secure their dream home without unwelcome surprises.