What Are Closing Costs in Connecticut?

When completing a real estate transaction, both buyers and sellers encounter a collection of expenses known as closing costs. These are fees and charges incurred to finalize the transfer of property ownership, distinct from the purchase price. They cover administrative, legal, and financial services needed to process the transaction. These costs encompass fees paid to lenders, third-party service providers like appraisers and title companies, and governmental entities. These fees ensure all necessary steps, from appraisals to title searches, are completed before ownership officially changes hands. Both parties have specific closing costs they are responsible for, settled on the day of closing.

Buyer-Paid Closing Costs

Buyers in Connecticut incur various closing costs, which range from 2% to 5% of the home’s purchase price. These expenses include fees related to the mortgage loan, property assessments, and legal requirements.

Loan origination fees are charged by lenders for processing and setting up the mortgage loan, often ranging from 0.5% to 1% of the loan amount. Lenders may impose a loan processing fee, covering underwriting services. An appraisal fee, typically between $300 and $500, is paid to ensure the home’s value supports the loan amount. A credit report fee, often around $42 per borrower, is assessed to pull credit histories.

Title insurance is a significant cost, with buyers covering both the lender’s and owner’s policies. The lender’s policy protects the mortgage holder from title defects, while the owner’s policy safeguards the buyer’s equity. Connecticut is an attorney-state for real estate closings, meaning a real estate attorney coordinates the closing and prepares necessary paperwork, with fees typically ranging from $800 to $1,500.

Recording fees are paid to the local municipality to officially register the deed and mortgage documents. Buyers prepay property taxes and homeowner’s insurance premiums, with lenders requiring up to a year’s worth of property taxes and the first year’s insurance premium at closing. Escrow setup fees may be required to establish an account for future property tax and insurance payments.

Seller-Paid Closing Costs

Sellers in Connecticut face a distinct set of closing costs, which range from 6% to 10% of the home’s sale price. These expenses are primarily associated with facilitating the sale and transferring ownership.

Real estate agent commissions represent a substantial portion of seller closing costs, averaging around 5.45% of the home’s sale price in Connecticut. This amount covers both the listing agent’s and the buyer’s agent’s fees, though recent changes mean buyers may increasingly pay their own agent’s commission. Sellers engage an attorney for the closing process. Attorney fees for sellers typically range from $1,000 to $2,500, covering legal document review, preparation, and ensuring a smooth transaction.

Conveyance taxes are a significant cost for sellers in Connecticut. This tax has both state and municipal components, ranging from 1% to 2.75% of the sales price, depending on the property type and municipality.

Sellers are responsible for any outstanding property taxes and prorated utility costs up to the closing date. Property taxes are prorated to ensure the seller pays their share for the period they owned the home within the current tax cycle. Utility bills like water and sewer are prorated to reflect the seller’s usage until the day of closing.

Estimating Your Closing Costs

Estimating closing costs involves various factors that influence the total amount for both buyers and sellers. These costs can fluctuate based on the specific details of the transaction.

The property’s location within Connecticut impacts costs due to variations in local taxes and recording fees. The total purchase price affects many fees, as some are calculated as a percentage of the sale amount.

The type of loan secured plays a role in buyer closing costs; different loan products, such as FHA, VA, or conventional loans, may have varying lender fees. Specific lenders can charge different amounts for services like loan origination and processing, making it beneficial for buyers to compare offers. Negotiation between buyers and sellers can influence who pays certain costs, potentially shifting financial responsibilities as part of the purchase agreement.

Understanding Your Closing Disclosure

The Closing Disclosure (CD) is a five-page document provided to borrowers that details the final terms of their mortgage loan and all associated closing costs. Its purpose is to ensure transparency and allow borrowers to understand their financial obligations before finalizing the real estate transaction. Lenders are required to provide this document at least three business days before the scheduled closing date, allowing time for review and questions.

The CD features sections that align with the initial Loan Estimate, making it easier for borrowers to compare estimated costs with finalized amounts. Key sections to review include the loan terms, which detail the loan amount, interest rate, and projected monthly payments. The form itemizes all closing costs, categorized into sections such as loan costs and other costs, providing a clear breakdown of fees for services.

The “Calculating Cash to Close” section summarizes the total funds required from the borrower at closing. The CD includes “Summaries of Transactions,” outlining the financial details for both the borrower and the seller. Borrowers should compare the figures on the Closing Disclosure with their initial Loan Estimate, as certain costs can change, though some have limits on how much they can increase. Any discrepancies should be addressed with the lender before signing the final documents.