Closing expenses (also called closing costs) are the expenses associated with transferring your property from you to your buyer. You pay these expenses at closing — a low-key event in which the buyer brings money and the seller gets money.

Generally, closing costs for the buyer are added to the mortgage amount or paid as an additional down payment (although a few have to be paid before the closing), while closing costs for the seller are subtracted from the settlement check.

Who pays what is up for negotiation. Sometimes an eager seller will offer to pay all of the buyer's closing costs. Most of the time, however, the buyer pays the majority of the closing costs:

• Mortgage points. Money paid by the buyer to lower the interest rate for the loan. (one point equals 1 percent of the loan amount.) When interest rates are low, few people pay points; when they're high, these costs can skyrocket.

• Loan origination fee. Administrative cost of processing the loan, paid by the buyer. Usually 1 to 2 percent of the loan amount.

• Credit report. Usually around $50, and may be paid by the buyer when the loan is first applied for.

• Prepaid interest. Interest owed by the buyer for the part of the month that comes after the closing date. Always try to close on the last day of the month so you won't owe any prepaid interest.

• Escrow. The first payment to the buyer's escrow account, which will collect monthly partial payments for insurance and property taxes and pay them when they're due.

• Title Insurance. A search to ensure that the seller actually owns the house. May be paid by seller or buyer.

• Recording fee. Fee to record the transfer of ownership. Often paid by the seller.

• Appraisal. Determines the estimated value of the house. Usually costs around $300 and may be due when the buyer applies for the loan.

• Survey. Determines the house's property lines; costs $150 to $350.

• Pest inspection. Ensures a pest-free (read that: termite-free) house and costs the buyer about $125.

• Property taxes. Most property taxes are paid one year after they are incurred, so you pay your 2008 property taxes in 2009. For this reason, the seller may have to pay six months' or a year's worth of property taxes to settle the bill.

• Insurance-policy payment. The buyer pays for one year of insurance in advance and/or brings proof that insurance for the house has been purchased.

Use WORKSHEET 17-1 to estimate your closing costs. Your lender should give you an estimate early in the paperwork process.

WORKSHEET 17-1