Final answer:
Closing costs when buying a home may include appraisal fees, credit report fees, title insurance, escrow fees, loan origination fees, home inspection costs, property taxes, and homeowners insurance. The concept of Escrow is part of closing costs for managing payments of home insurance and property taxes.
Step-by-step explanation:
When buying a home, there are several closing costs one might expect to pay. These include:
- Appraisal fees for determining the value of the property.
- Credit report fees to assess your creditworthiness.
- Title insurance to protect against problems with the property's title.
- Escrow fees for the service of managing funds between the buyer and seller.
- Loan origination fees for processing the mortgage.
- Home inspection costs for checking the condition of the home.
- Property taxes which are prorated at time of purchase.
- Homeowners insurance, which is generally required by the lender and can be included in the escrow account.
The concept of Escrow is related to closing costs as it often includes prepayments for home insurance and property taxes. This streamlines payments, ensuring they're part of the normal monthly mortgage amount.
Furthermore, down payments significantly affect the closing costs. The standard is a 20% down payment, but lower down payments can lead to additional costs such as mortgage insurance, which protects the lender in the event of a default and increases the overall mortgage amount.