What are closing costs?

Closing costs refer to the various fees and expenses that both buyers and sellers incur during the process of transferring property ownership. These costs are essential to consider because they can significantly affect the overall expense of a real estate transaction. Typical closing costs include loan origination fees, appraisal fees, title insurance, attorney fees, and recording fees.

In a real estate transaction, these costs are necessary to finalize the sale and ensure that all legal obligations are satisfied. It's important for buyers and sellers to budget for these costs in addition to the sale price of the property, as they are an integral part of the transaction process. For instance, closing costs usually add a percentage of the purchase price to the total amount paid by the buyer at closing, which is why understanding them is crucial for effective financial planning in real estate dealings.