What Are Recurring and Non-Recurring Closing Costs?

Lenders use a Good Faith Estimate to explain closing costs to a home buyer. These estimates contain recurring and non-recurring closing costs.

Definition of Closing Costs
Some home buyers are shocked when they discover it costs more than the price of a home to buy it. When you buy a car, for example, dealers don’t tack on fees and charge extra (except for sales tax) when buyers finance that vehicle. But buying a home is different.

While a buyer doesn’t pay sales tax on a single-family residence or condo, a buyer does incur additional fees to get the loan and for processing the paperwork to buy a home. The closing costs run about 3% of the sales price when the home is priced over $200,000, and a higher percentage applies when the price of a home is less than $200,000.

• Impound / Escrow Accounts -
Lenders may require that a buyer establish a reserve account held by the lender for future payment of taxes and insurance.

• Closing Agents - The individuals who prepare the closing documents and deed charge a fee.

• Title Policies - Title companies charge to issue title insurance that protects the borrower and the lender.

Definition of Non - Recurring Closing Costs
Fees that are paid once and never again are called non-recurring. These fees are one-time charges for such items as:

• Escrow or closing

• Appraisal

• Credit Report

• Title Policy

• Notary

• Wire fees

• Courier / Delivery

• Attorney fees

• Endorsements

• Recording

• State, County or City Transfer Taxes

• Home Protection Plan

• Natural Hazard Disclosure

• Home Inspection

• Fees paid to the lender in conjunction with the loan on the HUD-1, line 800.

Definition of Recurring Closing Costs
Recurring fees are those charges that you will pay again and again. They include such fees as:

• Fire Insurance Premium

• Flood insurance

• Property Taxes

• Mutual or Private Mortgage Insurance Premiums

• Prepaid Interest