San Diego and surrounding communities such as El Cajon are fantastic places to live. Active lifestyles, beautiful scenery and ample employment and educational opportunities are only a few of the perks of living in the San Diego area. If you are considering buying a home in the area, make sure you are well researched and ready for all of the costs and fees incurred throughout the buying process. One such instance in which costs can creep up on you is during the closing cost process. Read on for further details of these costs and potential amounts.

Photo by Chris Potter

What Are Closing Costs?

Closing costs are various fees in addition to the down payment needed to secure the mortgage. Closing costs are typically paid to the lender or a third party by the home owner at the time the mortgage is closed. Closing costs vary widely based on your location, type of property, and type of loan. Although most closing costs are paid by the homeowner, a portion of the closing costs on VA loans may be paid by the seller.

Which Costs Are Included?

Charges that make up your total closing costs are fees that are incurred by the mortgage lender in association with processing your loan. Fees may include:

• Survey Fees

• Title Search Fees

• Title Insurance

• Credit Report Fees

• Loan Processing Fees

• Escrow Deposit

• Land Recording Fees

• Underwriter Fees

• Home Inspection Fees

Survey fees verify property lines. Title search fees are a background check on the home to make sure there are no unpaid mortgage fees or liens against the property. Title insurance protects the lender in case there title isn't clear. Credit report fees are incurred by the lender when running your credit report. Loan processing fees are fees the lender incurs when processing the paperwork for your loan. An escrow deposit insures that you have back-up money for property mortgage insurance and property taxes. The land recording fees are paid to the city or county for recording the new property deeds. Underwriter fees are the cost of evaluating your mortgage loan. Home inspection fees are paid to a home inspection company, and can be requested by either the buyer or lender.

Other fees that may be included in the closing cost are pest inspection fees and discount points, which are fees paid in exchange for lower interest rates.

How Much Will You Pay in Closing Costs?

Closing costs fees should typically be between two and five percent of the total cost of your home mortgage.

When you first apply for a home mortgage loan, by law, lenders have three days to give you an estimate of what your closing costs will be. This is just an estimate and the actual closing costs may be higher, resulting in thousands of dollars more than you expected. When you receive your total closing cost bill, compare it to the estimate and ask for an explanation of any fees that you don't understand, especially administrative, mailing,and courier costs. Many of these fees can be negotiated or waived. If the total closing cost is excessively higher than the estimate, you are free to walk away from the deal and search for a mortgage lender with lower closing costs.

Can You Avoid Closing Costs?

Homeowners can avoid closing costs by getting a no-closing cost mortgage. These mortgages let you get into your home with less money up front, but typically cost more in higher interest fees, and the closing costs may be included in the purchase price, in which case you will be paying interest on the closing costs. This type of loan is ideal for homeowners that want to get into their new home with less up-front money.