Closing Costs 101: Everything You Need to Know

Closing costs are essential to the homebuying process, but they can often catch first-time homebuyers off guard. Understanding what closing costs entail is crucial to ensure you’re financially prepared for this significant step in your homeownership journey.

In this blog post, we’ll demystify closing costs by exploring the various expenses typically included, giving you a clearer picture of what to expect during the closing process.


Lender Fees

Lender fees are charges associated with processing your mortgage loan. They may include an application fee, loan origination fee, underwriting fee, and document preparation fee. These fees compensate the lender for their services and vary from one lender to another. Make sure to review these fees carefully and compare them among different lenders to find the best overall loan terms.


Appraisal and Inspection Fees

To assess the property’s value and condition, an appraisal and inspection are often conducted. The appraisal fee covers the cost of a professional appraiser determining the home’s fair market value. The inspection fee, paid to a certified inspector, ensures a thorough examination of the property for any structural or safety issues. These fees are typically paid upfront and are essential to protect your investment.


Title and Escrow Fees

Title insurance protects both the buyer and the lender from any potential ownership disputes or liens on the property. The title search and title insurance fees cover the cost of verifying the property’s title and issuing the insurance policy. Additionally, an escrow fee is charged for the services provided by the escrow agent who handles the closing process, including the transfer of funds and documents.


Prepaid Costs

Prepaid costs include expenses that need to be paid in advance at closing. This may include prepaid property taxes, homeowner’s insurance premiums, and mortgage interest. Lenders typically require you to prepay these costs to ensure the property is adequately protected and to establish an escrow account for future tax and insurance payments.


Attorney or Closing Agent Fees

In some states, it is common to have an attorney or closing agent involved in the closing process. Their role is to review the closing documents, ensure the legal aspects are in order, and oversee the transaction. Attorney or closing agent fees vary, so be sure to inquire about these costs in your specific jurisdiction.

In Colorado, the involvement of an attorney or closing agent in the closing process is not mandatory. However, many homebuyers in the state choose to work with an attorney or closing agent to ensure a smooth and legally sound transaction.


Government Recording and Transfer Fees

Government recording fees are charges for recording the purchase transaction and mortgage documents with the appropriate county or municipal office. Transfer fees may also apply if the property is located in a community or association with specific transfer requirements. These fees vary by location and are typically a set amount or calculated based on the property’s sale price.



Closing costs encompass various fees and expenses associated with finalizing the purchase of a home. It’s essential to be aware of these costs upfront to avoid any last-minute surprises. By understanding what closing costs entail, such as lender fees, appraisal and inspection fees, title and escrow fees, prepaid costs, attorney or closing agent fees, and government recording and transfer fees, you can better prepare yourself financially and make informed decisions throughout the home buying process.

Be sure to check with your real estate agent for their lender recommendations. You can call or text Michelle Burns for more information on starting the process of getting pre-approved today.