Closingi costsi are various expenses over and above the price of the property that are incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include items such as brokeri's commissions, discounti pointsi, origination fees, attorney's fees, taxes, titlei insuranceii premiums, escrowi agent fees, and charges for obtaining appraisals, inspections and surveys.
When you talk to a lender, they usually prepare a "Good Faith Estimate" of closing costs. Sometimes they will give it to you right away, but they are only required to mail it to you within three business days of applicationi. Mortgagei good faith estimates are usually based on past experiences.
Because the lender is the one who prepares the estimate, many buyers associate all the closing costs with the lender. This is not correct. The lender is only preparing an estimate of the closing costs you may incur when buying or refinancing and is not required to list all potential costs. Nor does the lender know what all the closing costs are actually going to be. A good faith estimate is only approximate mortgage loan costs. Always anticipate the actual closing costs are going to be more than the estimate.
There are two broad categories of closing costs. Non-recurring closing costs are items that are paid once and you never pay again. Recurring closing costs are items you pay time and again over the course of home ownership, such as property taxes and home owner's insurance.
Some of the items that appear here do not traditionally appear on a lender's Good Faith Estimate explanation and lenders are not required to show all of these items.
Approximate Mortgage Loan Costs
The following table gives a rough estimate of closing costs for a $100,000 mortgage with a 5% down paymenti. This is only an estimate and your closing costs will vary depending on the part of the country you live in and the size of your loan. Review the Good Faith Estimate prepared for your mortgage loan. You may be able to reduce your costs by shopping around for lower cost providers of closing services such as legal representation, title insurance, hazard insurancei, and inspections.
Estimated Closing Costs for $100,000 Mortgage Loan, 95% Loan to Value
Loan applicationi feei (includes crediti reporti and property appraisali) $300
Loan originationi fee (covers administrative costs) $1250
Title searchi and insurance fees (assures a 'clear' title) $500
Hazard insurance (Home Owner's Insurance) $400
Private Mortgage Insuranceii (2 Monthly Premiums) $100
Inspections (Structural and Mechanical, Termite) $350
Land Surveyi $150
Recordingi fees (at local government office) $50
Transfer taxes $1000
Buyer's attorney $500
Escrow depositi for taxes (depends on closing date) $325
Partial month's interesti (depends on closing date) $300
Total Estimated Closing Costs $5,225
As a percent of loan amounti 5.2%
Your exact closing costs will depend on where you live, how much you are borrowing, how you finance your mortgage and your closing date. Sometimes the seller of the house may agree to pay some of the closing costs. The seller is generally permitted to pay closing costs up to 3% of the sales price or appraised valuei of the home, whichever is less. Always remember that the closing costs are in addition to your down payment.
