Closing costs
Closing costs are the costs paid at the closing of a real estate purchase: on a mortgage, lender charges such as origination, appraisal and credit report fees plus title insurance fees, and in Virginia, the taxes due when the deed and any deed of trust are recorded.
The lender's half, summarized before the loan is final
A closing bill on a financed purchase splits into two parts that come from different places: the charges tied to the loan, which the lender summarizes for the borrower, and the taxes due when the papers are recorded.
The first part is the one the Consumer Financial Protection Bureau describes. In its words, "Mortgage closing costs are all of the costs you will pay at closing." Its list includes origination charges, the lender's appraisal fee, credit report costs, title insurance fees and any other fees required by the lender or paid as part of a real estate mortgage transaction, and it says lenders are required to summarize those costs in the Loan Estimate.
The same costs come back at the end in the Closing Disclosure, and how that form differs from the line-by-line record of what was actually collected and paid out is explained under settlement statement.
Not every land loan carries those two forms, because some business, commercial and agricultural credit sits outside the federal rule behind them, as whether a regular mortgage can buy land explains. Which disclosures a particular loan comes with is the lender's to say.
Recording taxes, at rates the Code fixes
The second part is set by statute. The clerk records a writing upon payment of the fees and any tax on it, and a sale with a loan usually puts two writings on the counter: the deed and the deed of trust. Four taxes can attach between them.
| Tax | What it is charged on | Rate in the Code |
|---|---|---|
| Grantor's tax (Va. Code 58.1-802) | The deed, on the consideration or the value, whichever is greater, when that exceeds $100 and not counting any lien remaining on the property | 50 cents for each $500 or fraction |
| State recordation tax on the deed (Va. Code 58.1-801) | Every deed admitted to record, except a deed exempt from taxation by law, on the consideration or the actual value of the property, whichever is greater | 25 cents per $100 or fraction |
| Local recordation tax (Va. Code 58.1-3800) | The first recording of a taxable instrument in a city or county that has imposed it | One-third of the state recordation tax |
| Recordation tax on a deed of trust (Va. Code 58.1-803) | Except as the section otherwise provides, the obligation secured; for a credit line deed of trust, the maximum amount that may be outstanding at one time | 25 cents per $100 |
Working the grantor's tax out on an actual price belongs to what the grantor tax in Virginia is, and the tax has its own entry under grantor tax.
Credits, deposits and who carries a line
Not every figure near the bottom of a closing statement is a cost. A property tax proration divides a bill between buyer and seller rather than adding a new charge, and an earnest money deposit applied at closing can appear as a credit rather than a charge.
Which side of the statement each cost lands on is mostly a contract question: the Code names the grantor as the payer of the grantor's tax and lets the parties shift it, and the rest is set out in who pays closing costs in Virginia.
Trying to read the closing costs on a land purchase?
Send the county and whether a loan is involved, and Lowell will show you which lines come from the lender and which come from Virginia's recording taxes, and who confirms each figure. No cost, no obligation.
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Questions about this term
Does a cash purchase of land still have closing costs?
Some of them. The lender charges on the CFPB's list, such as origination and credit report fees, come with a loan, so a buyer paying cash does not see them. The deed still goes to the clerk, who records a writing upon payment of the fees and any tax on it, so the grantor's tax and the state recordation tax still attach to a deed that is not exempt, along with any local recordation tax the county has adopted. Title work and other charges depend on the contract and the services each side uses.
Where this page's facts come from
Every rule, office and figure above traces to one of these. Rules change; check the office before you act on one.
- Mortgage key terms: closing costs Consumer Financial Protection Bureau
- What is a Closing Disclosure? Consumer Financial Protection Bureau
- 12 CFR 1026.3: exempt transactions under Regulation Z Electronic Code of Federal Regulations
- Va. Code 58.1-802: grantor's tax Code of Virginia
- Va. Code 58.1-801: state recordation tax on deeds Code of Virginia
- Va. Code 58.1-803: recordation tax on deeds of trust Code of Virginia
- Va. Code 58.1-3800: local recordation tax Code of Virginia
- Va. Code 17.1-223: recording upon payment of fees and taxes Code of Virginia