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What is a Closing Cost?

When you apply for a loan your lender is required by law to give you a Truth-in-Lending estimate of your closing costs. This estimate is based on local practices as well as the sales agreement with the seller. Both the buyer and the seller are responsible for portions of the closing costs. Some of the costs depends on where you live and the local custom as to who pays what. The majority of the fees are in relation to the loan where the lender charges certain fees for giving you a mortgage. The RESPA (Real Estate Settlement Procedure Act) HUD-1 Statement outlines who pays what and a copy is given to the buyer at the end of the closing for his/her records. The RESPA HUD-1 is signed by the buyer, seller and closing agent. RESPA is governed by the Department of Housing and Urban development (HUD). This act was passed to help the buyer and seller and ensure an ethical transaction. There will also be costs outside the closing. These are referred to as considered payments outside closing (POC). Some of the general buyer and seller costs and fees are outlined below.

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