Closing Costs Explained

by Mark Wellborn


When searching for a new home, most prospective buyers look at a property’s listing price as the total amount of money that they are going to have to shell out. Unfortunately, at settlement there are a handful of other fees that need to be paid.

Closing costs — fees you pay once you get a home loan — have always been a confusing part of the home buying process. The fees usually include taxes, lender and financing costs as well as attorney and other administrative fees. Closing costs generally range between 2 and 7 percent of the property value, and you must pay these costs before moving into your new home.

In a down market, the conventional wisdom is that buyers have a fair amount of negotiating room with these fees. Also, before finalizing, buyers should get at least three Good Faith Estimates from mortgage lenders. Below are some typical fees for the DC area.

  • DC Transfer Tax (1.45 percent of sales price or 1.1 percent of sales price under $400K)
  • Settlement Fee ($100-$500)
  • Release Preparation Fee ($75-$150)
  • Release Recording Fee ($50-$75 per lien)
  • Messenger Fees ($50-$100)
  • Lender Application Fee ($295)
  • Title Search ($200)
  • Title Insurance ($1,000-$4,000)
  • Appraisal Fees ($300)
  • Inspection ($385)
  • Survey Fee ($250)
  • Credit Report Fee ($55)
  • Deferred Transportation Related Facilities Charges ($300-$500)
  • Well or Septic Certification Fees ($200-$500)
  • Home Buyer’s Warranty ($300-$600)

This article originally published at http://dc.urbanturf.com/articles/blog/closing_costs_explained/905


  1. Alex said at 10:31 am on Thursday May 14, 2009:

    Very helpful. Thank you!

  1. Keith said at 11:07 am on Thursday May 14, 2009:

    The rule of thumb I’ve been given is that closing costs in DC will be equal to about 3% of the purchase price.

    Home inspection is $85? Figure 7 times that. Don’t forget escrow for property taxes and hazard insurance.

    Don’t understand the bit about getting 3 GFEs before finalizing. Finalizing what? The key thing is to get the HUD-1 2-3 days before closing [if you can, sometimes the title company is in a mad rush to wrap up the paperwork just minutes before the closing] so you can spot errors or unexpected charges before the closing.

    While this may be a down market, I wonder how much wiggle room there really is given the tight credit market and all the refinancing activity.

  1. Mark Wellborn said at 11:11 am on Thursday May 14, 2009:

    Thanks, Keith. That home inspection $ was actually a typo and we have changed it.

  1. Shannon said at 11:12 am on Thursday May 14, 2009:

    The title insurance would be that rate if you were buying a place for 100K.

    Here is a sample rate schedule from a local title company.  Each title company is different and you can request a schedule of their title insurance rates in advance.

    100K or less 4.68/1000
    100K to 500K 4.08/1000
    500K to 1M 3.60/1000
    1M-5M 2.40/1000
    5M+ 2.10/1000

    So a place that is 350K the title insurance could be 1428.00 depending on the settlement company.

  1. David Bediz said at 12:03 pm on Thursday May 14, 2009:

    I usually figure title insurance as around .5% for my clients… so these days the cost is between around $1300-5000 depending on a purchase of around $250,000 to 1,000,000. Also remember, closing costs for coops are SIGNIFICANTLY less… instead of 3% you can come to the table with your downpayment and about $1000 to cover mainly lender fees. Plus there’s no prepayment of property taxes into escrow so you save the equivalent of up to 10 months of property taxes. Just my two cents!

  1. Jordan Schaffel said at 11:34 am on Monday May 18, 2009:

    Here’s another way to explain the closing cost process in a visual way.


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