How Much Are Closing Costs On a Mortgage? on February 7, 2021 Many people going through the mortgage application process will ask, “How much are closing costs on a house?” Typical closing costs usually range anywhere from 3% to 6% of the purchase price of the home. If you’re confused regarding mortgage closing costs on a house, then Mortgage Assist can provide you with professional advice from its skilled and dedicated team of agents and mortgage brokers. Mortgage Assist can also help set you up with a mortgage assist program, and that will help you secure a mortgage even if you think that your credit rating might not be high enough for that. Going through the mortgage process can be a frustrating task for those that have never had to experience it before. It involves a lot of research, a lot of paperwork, and a lot of questions that you should be asking your mortgage lender before you’re able to successfully get the keys to your new home. There will be a number of different parties involved in the process. Your mortgage lender, the real estate agent, and an attorney will all be providing services you’ll need. These are known as closing costs, and every mortgage application process ends with them. What Are Closing Costs? Closing costs are defined as all of the required fees that are involved in the purchase of a home. These closing costs contain the deadline of being due at the closing of the transaction. The buyer isn’t the only one that has to deal with closing costs. The seller will also be dealing with closing costs associated with the realtor and other things. Closing costs can come in many different forms: Underwriting the terms of the mortgage. Commissions on the real estate transaction. Applicable taxes. Any associated insurance premiums. Record filings. By law, both buyers and sellers must be completely aware of all of the closing costs involved in a transaction. What are typical closing costs for the average home-buyer? The average closing cost for a home is around 3% to around 6% of the total purchase price of the home. So, if you’re going to be purchasing a home for $200,000, the closing costs will amount to anywhere between $6,000 and $12,000. The amount of closing fees you’ll be paying also depends on a couple of different things: Your location. The type of loan that you’ve gone with. The mortgage lender you’re dealing with. It’s always good to keep a conscious mind of all of the closing fees involved because they are a decent chunk of change at the end of the day. How Much Are Closing Costs For The Buyer? If you’re looking at the typical closing costs for the buyer, they will be around $7,200. Again, this number will depend on where you’re located. In some areas, they could be a lot higher than where you’re currently located, and some areas will be a lot lower. After receiving your mortgage application, a lender has to give you a loan estimate within a specific period of time. By law, in some places, the loan estimate needs to be given within three days. The loan estimate has all of the applicable closing costs on it. It also contains a bunch of other information surrounding the details of the loan. Sometimes the numbers on the loan estimate will go up or down a bit, but there typically won’t be any massive surprises that you should be expecting. Within three days of your closing, the mortgage lender needs to give you what is known as a closing disclosure form. This form will outline a bunch of information on it such as the closing costs than were originally estimated, and also the final closing costs. It should also show what caused the increase or decrease in the closing costs if that occurs. If you do receive a closing disclosure form that contains new fees that you didn’t notice before, you’ll want to go to your mortgage lender as soon as you can to discuss these things. Why Do Closing Costs Even Exist? A lot of people want to get the mortgage application and closing process out of the way as fast as possible. Buyers aren’t the only people that get frustrated with it. Sellers don’t want to sit around waiting after an offer is made on their home, either. You might be wondering why you even have to pay additional closing costs after you’ve just made a huge down payment for a mortgage that will last many years. The real estate process isn’t always a black and white scenario. There are a lot of different things that go on that make it seem more complicated than it should be. When you’re purchasing a used home, you’ll typically want to do a home inspection to ensure that everything is in working order. After that, you’ll be subject to the transfer and property taxes. You’ll also require insurance on the home as well as other fees. All of these closing costs add up to an amount that you might not be comfortable with. That’s when you need to be consulting with your lender and real estate agent for further information. Closing Cost Fees When you take a look at your closing disclosure and loan estimate forms, you’ll see a list of the closing costs involved in an itemized fashion. Here’s a list of some of the most common closing costs involved in a real estate transaction: Application Fee In order to process a mortgage application, an application fee will need to be paid. If you don’t want to deal with any surprises, speak to your mortgage lender if they charge an application fee before beginning to fill one out. Fee For The Attorney A real estate attorney is required in a real estate transaction and they are paid to go over the purchase agreement and all of the related contracts involved with that. Closing Fee This is a fee that is related to whoever deals with all of the closing details of the transaction. Courier Fee While the courier fee might not be a tremendous amount of money, it’s still another fee that is required to get the documents from point A to point B. If you decide to do the closing over the internet, then the courier fees can be avoided. Credit Report Fee For a mortgage lender to do an inquiry into your credit report, there will be a small fee involved. There are some lenders that don’t charge this fee if one of the credit reporting agencies provides them with a discount. Home Insurance Insurance on your home is another fee that’s involved in closing costs. Lender’s Title Insurance Lender’s title insurance is a fee that will only need to be paid once. It is there to keep the mortgage lender protected if there is a lien that occurs along the way. Transfer Fees Transfer fees are fees that result from transferring ownership from one person to the next. You’ll have to take a look at your contract to see if the buyer or seller will be responsible for paying that fee. Points For people that want to have a lower interest rate on their mortgages, they can opt to pay more money up-front. A single point is equivalent to 1% of the total amount of the loan. If interest rates are low, then there isn’t a huge point in doing this, but if they are high, then you could end up saving some money over the long-run. Owner’s Title Insurance If there’s another person that decides to challenge your ownership of your home, this is where the owner’s title insurance comes in. It’s not a mandatory fee, but some attorneys suggest getting it. It usually equals around 1% of the total price of the home. Origination Fee The mortgage lender deals with administrative functions in the mortgage application process. These fees result in around 1% of the total cost of the loan. There are some mortgage lenders that don’t bother charging origination fees. If you find a lender that doesn’t charge this fee, you’ll want to check the interest rates to see if the origination fee will be included in there instead. Sometimes they will have interest rates that are high to make up for the waived origination fees. Pest Inspection Fees This is another fee that some people decide to pay before closing on a home. No one wants to move into a home that potentially has mice running around it, so getting a pest inspection done can bring some people peace of mind. Private Mortgage Insurance Private mortgage insurance can result if your down payment is under a certain amount. Appraisal Fee For The Property The appraisal fee is done to determine how much your home is worth. This fee can range anywhere from $250 to $550 depending on the home and who it’s done by. Property Tax Upon closing, property taxes will be due from the closing date through until the rest of the tax year. Rate Lock Fee The mortgage lender will charge a rate lock fee to guarantee you the interest rate that you’re locking in at. This interest rate will then be locked in for an agreed-upon amount of time. It’s usually from the pre-approval of the mortgage until the closing of it. There are some lenders that don’t charge a rate lock fee, but those that do will usually charge around 0.25%. Commissions On Real Estate Real estate commissions are another huge fee you have to keep in mind. Buyers usually don’t have to pay the real estate commissions, but when you’re selling, a real estate agent can take as much as 6% of the value of the home. That amount is then split up with the real estate agent for the buyer. Sometimes people can negotiate real estate fees with real estate agents. Recording Fee To process the public land records, there will be a recording fee involved. This fee is typically around $130 depending on your location. Survey Fee A survey fee is involved when you have to get a surveying company out to conduct an analysis of the property to determine the property lines between you and your surrounding neighbor’s land. The surveying fee will be anywhere between $350 to $500. If the property is massive or takes a long time to survey, the cost will be higher. Tax Monitoring Fees Tax monitoring fees are involved to ensure all of the property tax payments are being made. They are also there if you happen to have any problems with paying the property taxes at any point in the future. Title Search Fee The title search fee is a fee associated with public property records. Sometimes home-ownership discrepancies occur and public records need to be researched. This fee can cost anywhere between $220 to $450. Transfer Tax Depending on where you live, a transfer tax will be a part of closing costs. Underwriting Fees The mortgage lender will charge underwriting fees for all of the time spent in going over the mortgage application and the final approval of the loan. It takes a decent chunk of time to go over all of the documentation involved in the mortgage application. Browsing through documentation supporting your finances, employment status, credit report history, and other things results in a fee of about $820. How Can You Lower Closing Costs? After seeing all of the fees associated with closing costs, many people might become frustrated. From the down payment, all of the expenses involved in moving from your current location to your new home, and any renovations that you need to do, closing fees are the last thing you want to worry about. There are a couple of approaches you can take to avoid dealing with so many fees. Don’t Settle On The First Lender You Meet Spend a good chunk of time visiting various different lenders to see if you can scrape up better deals. A lot of first-time home-buyers might not know of the savings they can accumulate just by doing some comparisons between the different lenders. There are a bunch of options on the closing cost list that aren’t mandatory. You typically don’t need to bother with getting a pest inspector or title company involved like your mortgage lender might have recommended. Doing a little bit of research will go a long way in ensuring that you’ll save some money. Take The Closing Appointment Near The Month’s End If you make your closing appointment towards the end of the month, you’ll reduce the number of daily interest charges you’ll have to pay. Ask your mortgage lender how much you’ll be able to save by scheduling it later in the month. Ask The Seller For Assistance Sometimes you can negotiate a deal with the seller and they will reduce the total price of the home or at least help you out with the closing costs involved. A seller will be more prone to exercising this option if their house has been sitting vacant for quite some time. When the real estate market is going strong, however, sellers might completely dismiss the option of helping you out. It never causes any harm in asking. Who knows, you could potentially get lucky and pay less for the home. Look At The Loan Estimate And Closing Disclosure Forms and Do Comparisons After you’ve received the loan estimate, you’ll want to carefully analyze every single detail outlined in it. If you begin seeing fees in there that you’re not comfortable with, you’ll want to address them with the lender. If your lender isn’t able to give you a good answer on any of the fees, then that’s a warning sign and you should consider taking your mortgage application to a different lender altogether. You’ll want to completely understand every single thing displayed in the loan estimate. Even though closing costs do tend to go up or down sometimes, you should ask your lender why that happens. Huge fluctuations in the loan estimate can be another red flag to analyze further. If you notice any random fees in there that haven’t been previously addressed, be very cautious about that. Consider Negotiating Fees That Are Specific To The Loan Sometimes people notice there are miscellaneous fees that make no sense. Bring this up with your lender and question if they can get rid of those fees. If your lender doesn’t cooperate with you on some of the fees that you don’t think should be there, then simply go to a different lender. If you have a very cooperative lender, sometimes you’ll get lucky and they will cover all of the associated closing costs. Other times, they may just include them in the loan. If your lender does agree to do this, you’ll want to take a look at the interest rates and see if they increased. Sometimes the lenders will put those closing fees into the interest rates, and that means you’ll be paying for the closing costs anyways. For the most part, closing costs are something that you can’t really get away from. Doing your research, visiting various lenders, and keeping an open mind can go a long way in saving you money in the long-run. Because you’ll be paying off your mortgage for quite some time, you’ll need to become an expert on everything that your mortgage entails.