What Are Typical Closing Costs in Tennessee?
Understand typical closing costs for Tennessee home buyers and sellers. Get clear insights into what to expect financially.
Closing costs represent various fees and expenses that buyers and sellers pay at the finalization of a real estate transaction. These costs are distinct from the property’s purchase price or the buyer’s down payment. They cover the services and charges incurred throughout the home buying or selling process, ensuring the legal transfer of ownership and the proper establishment of any associated financing. Understanding these costs is important for anyone budgeting for a home purchase or sale, as they can significantly impact the total financial outlay.
Understanding Common Closing Cost Categories
Closing costs involve several categories of fees and expenses. One primary category involves lender-related fees, which are charges associated with securing a mortgage loan. These fees compensate the lender for processing and underwriting the loan.
Another category is title and escrow fees. These expenses verify clear property ownership and manage the secure exchange of funds and documents. Ensuring the title is free of defects protects both the buyer’s and the lender’s interests.
A third category is government fees and taxes, imposed by state or local authorities on the transaction. These can include taxes on the property transfer itself or fees for officially recording the new ownership. Prepaid costs involve expenses paid in advance for items like property taxes or homeowner’s insurance premiums, often required to establish an escrow account.
Buyer’s Closing Expenses
A loan origination fee, which covers the lender’s administrative costs for processing the loan, often ranges from 0.5% to 1% of the loan amount. An appraisal fee is also common, paid to an independent appraiser to determine the property’s market value, usually costing between $400 and $600.
A credit report fee, typically around $30 to $50, covers the cost of obtaining the buyer’s credit history. Lender’s title insurance is another expense, protecting the lender’s investment in the property should a title defect arise. This policy’s premium can vary but is generally based on the loan amount.
Recording fees are charges levied by the local government to officially register the deed and mortgage documents in public records, often ranging from $100 to $200. Buyers commonly pre-pay several months of property taxes and homeowner’s insurance premiums into an escrow account, which the lender uses to pay these recurring costs. A survey fee, typically between $400 and $700, is paid to a surveyor to verify property lines and boundaries.
An underwriting fee, separate from the origination fee, covers the lender’s cost to assess the loan application and borrower’s creditworthiness. Attorney fees may be incurred if a buyer chooses or is required to have legal representation to review documents and facilitate the closing, which can range from $700 to $1,500. Buyers often pay a portion of the escrow fees, which cover the costs associated with the escrow agent’s role in holding and distributing funds and documents.
Seller’s Closing Expenses
Real estate agent commissions are often the largest expense for sellers. These commissions typically range from 5% to 6% of the home’s sale price, usually split between the buyer’s and seller’s agents. A significant state-specific cost for sellers in Tennessee is the Tennessee Realty Transfer Tax. This tax is assessed at a rate of $0.37 per $100 of the property’s value.
Owner’s title insurance is commonly paid by the seller in Tennessee, providing protection to the buyer against any future claims to the property’s title. The premium for this policy is generally based on the sale price of the home. Sellers are also responsible for prorated property taxes, covering the portion of the current year they owned the property before the sale date.
Mortgage payoff statement fees may be charged by the seller’s current lender to provide a detailed statement of the remaining loan balance. Recording fees might also apply for releasing the old mortgage lien from public records. If the seller has legal representation during the transaction, attorney fees may be incurred. If the property is part of a homeowners’ association, prorated HOA fees for the period up to the closing date would be the seller’s responsibility.
The Closing Disclosure Form
The Closing Disclosure (CD) form is a five-page document that provides the final details about the mortgage loan. It itemizes all closing costs for both the buyer and the seller, ensuring transparency by presenting an overview of expenses, cash to close, and loan terms.
The CD is typically provided to the buyer at least three business days before the scheduled closing date, allowing time for review and comparison with the Loan Estimate. Buyers should carefully examine pages 2 and 3 of the CD, which detail the specific costs associated with the loan and other transaction expenses.