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What Are Recurring and Non-Recurring Closing Costs?

How to Figure Out the Cost to Close Escrow

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A home buyer's closing costs are separated into recurring and non-recurring closing costs.

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For decades, lenders used a Good Faith Estimate to explain closing costs to a home buyer. These estimates, called GFEs, contained recurring and non-recurring closing costs. Since the lender was not required to stand behind those numbers, they could be misleading and were inconsistent from lender to lender. In an effort to provide more disclosure to borrowers, effective January 1, 2010, the government standardized the Good Faith Estimates and added more pages. Now, every lender is required to disclose accurate numbers.

While the recurring and non-recurring closing costs are clearly defined in the new GFE, some of the other things a borrower would like to know are not. For example, nowhere on the GFE does it spell out the borrower's monthly PITI mortgage payment. But that's the government for you.

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.

  • Lawyers / 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:

Definition of Recurring Closing Costs

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

At the time of writing, Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.

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