Both homebuyers and sellers need to plan for closing costs.

Closing costs are part of every home sale, yet many buyers and sellers don’t know what they entail. Check out this overview of closing cost fees, how much they are and who pays them.

What are closing costs and who pays them?

Closing costs are fees paid for services provided as part of the mortgage process.

The most common closing costs for buyers include:

• Loan application fee
• Loan origination fee
• Underwriting fee
• Recording/filing fees
• Taxes
• Points
• Appraisal
• Inspection
• Escrow — which can include prepaid taxes

Sellers also pay closing costs, which can include:

• Commission
• Title insurance
• Transfer taxes

How much are closing costs?

Closing costs vary based on a number of factors.

For buyers, the value of the loan, not the purchase price, determines how much is paid for points. Total closing costs can range from 2-6% of the loan amount, this wide range is due to varying fees from lender to lender, loan type (conventional, FHA, USDA or VA) and what services are used.

For sellers, the most significant closing cost is commission, which on average in Michigan runs around 6.00% and is calculated based on the purchase price.

By law, closing costs must be provided to buyers and sellers in advance of closing day.

How to pay for closing costs

Buyers and sellers can pay for closing costs in cash. However, most often sellers pay for them out of the proceeds from the sale. Buyers often roll the costs into their home loan.

Choose Consumers for your next home loan

At Consumers, we work hard to keep fees as low as possible. For example, our home construction loans have only one closing fee, unlike a typical bank that requires two closing fees. When you’re ready to buy a home, talk to us about Consumers mortgage options.

Consumers helps thousands of members finance first and second homes, land home improvement projects each year. We’d love to help you with a mortgage or home equity line of credit; contact us online or call us at 800-991-2221.