What Are Closing Costs and How Much Are They?

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Cash-Out Refinance vs. Home Equity Loan: What's the Difference?

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What Are Closing Cost and How Much Are They?

Closing costs are fees and expenses you pay when you close on your house, beyond the down payment. These costs can run 3 to 5 percent of the loan amount and may include title insurance, attorney fees, appraisals, taxes and more. Copy & Paste the link below for more details:

https://www.investopedia.com/mortgage/mortgage-guide/closing-costs/ to see the list of Closing Costs and help for you to plan for them, but be sure to talk to your mortgage lender about the specifics for your home purchase.

What Makes Up Your Closing Costs?

Loan Origination Fees. These include fees for processing and underwriting the loan. Underwriting is part of the loan approval process, when the lender checks to see if you’re able to repay your loan based on a variety of factors such as credit history. These fees vary and go to your lender.

Appraisal And Survey Fees. The appraisal and survey are used to help confirm the fair market value of your home. Fees for these services may vary but are usually several hundreds of dollars.

Title insurance. Policies for both the buyer and lender are calculated based on the purchase price.

Homeowners insurance. The first year is generally paid at closing.

Private Mortgage Insurance (PMI). If your down payment is less than 20 percent, you may need private mortgage insurance (PMI). Copy & Paste the link below to see how much you should pay:         https://www.investopedia.com/ask/answers/09/pmi.asp and what protects the lender against losses, if you cannot repay your loan.

What Are Mortgage Points and How Do They Affect Your Loan? Also known as discount points. Copy & Paste or Click the Link below to get more information about what are Mortgage Points and how do they affect your loan.   https://www.investopedia.com/mortgage/mortgage-rates/how-it-works/ and how much is paid directly to the lender at closing in exchange for a lower interest rate on your mortgage.

Property Tax. Usually, six months of advance tax is paid at closing. Taxes vary by location. Keep in mind, after the loan closes, the property may be reassessed and the value could increase along with the real estate tax. If the taxes are reassessed, then the amount the lender originally put aside in an escrow account may need to be readjusted to ensure there is enough to pay the new tax amount.

Closing Or Escrow Fee. This fee goes to the escrow agent who helps you close. It can vary based on the purchase price of the home.

Attorney Fees. Some states require you to have an attorney. Their fees may be bundled into your closing costs.

Miscellaneous Fees. A number of smaller fees may also be included at closing, from the cost of a credit check to the cost of registering your purchase with the local government.

Who Pays Closing Costs And When?

After saving up to purchase a new home, getting pre-approved, and making a down payment, it's hard for buyers to accept that they'll have additional out-of-pocket expenses. Some good news, then, is that both buyers and sellers typically pitch in to cover closing costs, although buyers shoulder the lion's share of the load (3% to 4% of the home's price) compared with sellers (1% to 3%) and while some expenses must be paid upfront before the home is officially sold (e. g is the abbreviation for the Latin phrase exempli gratia, meaning “for example.”); (the home inspection fee when the service is rendered) and others, like property taxes and homeowners insurance are recurring; most are paid at the end when you close on the home and the keys exchange hands.

How To Estimate Your Closing Costs

Once you submit a mortgage application, your lender is required by law to give you a Loan Estimate (LE) within a few days.  If you have questions or something doesn’t add up in your LE, ask your lender or attorney right away. You want to avoid surprises. Prior to closing your loan, you’ll receive your final Closing Disclosure listing your closing costs. Be sure to compare your Closing Disclosure to the LE you received when you applied for your loan. Once you’ve determined your closing costs, check with your closing agent about what type of payment is acceptable; generally, you’ll be asked to pay via cashier’s check.

Knowing what closing costs to expect can help better prepare you for the home buying process.  A Closing Cost Calculator like this one:  Copy & Paste or Click the Link below to help you estimate the amount you’ll want to budget for.

https://www.bankofamerica.com/mortgage/closing-costs-calculator/  

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