Closing costs are simply this: the costs of borrowing money, establish the loan, and preparing the necessary documents to finalize the sale. These costs may be significant and are easily overlooked by a first-time buyer.

• The Costs of Borrowing Money. This includes what some lenders call "discount points," a one-time charge to adjust the yield on the loan to what market conditions demand. Each point equals one percent of the mortgage amount. Two and one-half points on a $100,000 mortgage would cost $2,500.

• The Costs of Establishing a Loan. These might include the loan origination fee, appraisal fee, and credit reports. Premiums for hazard and mortgage insurance are usually paid at closing. Also, prepaid interest will be collected for the period between closing and the end of the purchase month.

• The Costs of Document Preparation. Title costs pay for the search of public records to determine if the property you want to purchase is free from any other ownership or liens. Recording and transfer fees cover the legal recording of the deed with the proper governmental agencies as well as the transfer taxes.

Overall closing costs vary from state to state. Check with your real estate agent for an estimate of your closing costs