Home Buyer Closing Costs
Home Buyer Closing Costs
Typically, home buyers will pay between about 2 to 5 percent of the purchase price of their home in closing fees. Your lender will give you a Loan Estimate for your loan, which will include what the closing costs on your home will be, within three business days of receiving your completed loan application. But these are just an estimate, and many of the fees listed can change. If they do change, you may receive a revised Loan Estimate so there are no surprises along the way.
At least three business days before your closing, the lender should give you Closing Disclosure statement, which outlines closing fees. Compare this to your Loan Estimate and ask the lender to explain what each line item on your closing costs is and why it is needed.
Closing costs vary widely based on where you live, the property you buy, and the type of loan you choose. Here is a list of fees that may be included in the closing cost. The list is inclusive of fees you may see, but it’s not likely that your loan will include all of the fees listed here.
Application Fee: This fee covers the cost for the lender to process your application.
Appraisal: This is paid to the appraisal company to confirm the fair market value of the home. Estimate cost between $400-$600.
Attorney Fee: This pays for an attorney to review the closing documents on behalf of the buyer or the lender. This is not required in all states. Estimate cost between $1,500-$2,000.
Closing Fee or Escrow Fee: This is paid to the Title Company or Escrow Company. The Title or escrow company oversees the closing as an independent party in your home purchase when an attorney is not hired. Some states require a real estate attorney be present at every closing.
Courier Fee: This covers the cost of transporting documents to complete the loan transaction as quickly as possible.
Credit Report: A Tri-merge credit report is pulled to get your credit history and score. Your credit score plays a big role in determining the interest rate you’ll get on your loan.
Escrow Deposit for Property Taxes & Mortgage Insurance: Often you are asked to put down three months of property tax and mortgage insurance payments at closing.
FHA Up-Front Mortgage Insurance Premium (UPMIP): If you have an FHA loan, you’ll be required to pay the UPMIP of 1.75% of the base loan amount. You are also able to roll this into the cost of the loan if you prefer.
Flood Determination : This is paid to a third party to determine if the property is located in a flood zone. If the property is found to be located within a flood zone, you will need to buy flood insurance. The insurance, of course, is paid separately.
Home Inspection: You will likely get your own home inspection to verify the condition of a property. Estimate cost between $300 to $500 for an average-sized house (1,500 to 2,500 square feet); more for larger homes.
Home Owners Association Transfer Fees: The Seller will pay for this transfer which will show that the dues are paid current, what the dues are, a copy of the association financial statements, minutes and notices. The buyer should review these documents to determine if the Association has enough reserves in place to avert future special assessments, check to see if there are special assessments, legal action, or any other items that might be of concern. Also included will be Association by-laws, rules and regulations and CC & Rs.
Homeowners’ Insurance: This covers possible damages to your home. Your first year’s insurance is often paid at closing.
Lender’s Policy Title Insurance: This is insurance to assure the lender that you own the home and the lender’s mortgage is a valid lien, and it protects the lender if there is a problem with the title. Similar to the title search, but always a separate line item.
Loan Discount Points: “Points” are prepaid interest. One point is one percent of your loan amount. This is a lump sum payment that lowers your monthly payment for the life of your loan.
Owner’s Policy Title Insurance: This is an insurance policy that protects you in the event someone challenges your ownership of the home. It is usually optional.
Origination Fee: This covers the lender’s administrative costs. It’s usually about 1 percent of the total loan but you can sometimes find mortgages with no origination fee.
Prepaid Interest: Most lenders will ask you to prepay any interest that will accrue between closing and the date of your first mortgage payment.
Private Mortgage Insurance (PMI): If you’re making a down payment that’s less than 20% of the home’s purchase price, chances are you’ll be required to pay PMI. If so, you may need to pay the first month’s PMI payment at closing.
Recording Fees: A fee charged by your local recording office, usually city or county, for the recording of public land records. Estimated cost between $200-$300
Survey Fee: This fee goes to a survey company to verify all property lines and things like shared fences on the property. This is not required in all states. Estimated cost between $480 -$900
Title Company Title Search or Exam Fee: This fee is paid to the title company for doing a thorough search of the property’s records. The title company researches the deed to your new home, ensuring that no one else has a claim to the property. Estimated cost between $150 to $400, but can be higher if the property’s history is more complex.
Underwriting Fee: This also goes to your lender, covering the cost of researching whether or not to approve you for the loan.
