What Exactly Are Closing Costs

Buying a home is an expensive task

Buying a home is an expensive task. But the home's actual purchase price is just one portion of what buyers will pay. If they need to finance a home, they'll also have to pay the closing costs on their mortgage loans. And buyers should be aware: These are called closing "costs" for a reason. They're not cheap.

Financial Web site Bankrate.com reported in its most recent survey of closing costs, that the average buyer pays $2,732 in origination and title fees when closing on a $200,000 mortgage. These numbers represent purchases in the year 2009.

These fees can be even higher depending on where you live. In Texas, buyers paid an average of $3,855 to close their $200,000 mortgage loans in 2009, Bankrate.com reported. That ranked as the highest average in the nation. And in New York, which came in second, buyers paid an average of $3,408 in origination and title fees, according to Bankrate.

These fees cover a host of services, everything from title search to real estate attorneys to the cost of preparing the documents needed to close a loan. States and local municipalities usually add their own taxes to the mix, too, making closing a mortgage loan an expensive proposition.

These significant fees are the main reason why it's so important for borrowers to shop around before deciding to work with a mortgage lender or bank. Different lenders charge wildly varying closing costs for their loans. It's possible to save thousands of dollars in closing costs by interviewing several mortgage lenders before picking one.

If you want to close a loan with the lowest costs, by the way, it's best to live in states with lower populations. Bankrate's survey found that more densely populated states tended to feature the highest closing costs. In 2009, Nevada boasted the lowest average closing costs: $2,276.

by: RW Tanner

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