Closing Costs

Verify your closing costs with your lender.

What Are Closing Costs?

Closing costs are the fees that you will need to bring on the day that you will meet at the attorney’s office to take possession of your new home.

Your lender should go over these fees with you, but listed below are some of the fees to be expected:

Credit Report Fee: This fee is most likely paid up front. The fee covers the cost the lender needed to run your credit to verify your credit worthiness.
Appraisal Fee: This fee is also most likely paid up front as well. This pays for the appraisal on the home that your are purchasing.
Loan Origination: This fee varies depending on the lender. Normally, it is 1% or less. This fee covers the lender’s cost to process the loan.
Loan Discount: Should you want to lower your interest rate for your loan, the lender may allow you to pay this one-time charge.
Title Insurance / Attorney Fee: These fees allow the attorney to search to verify clear title to your home, title insurance, document preparation, and closing the loan package for you.

PMI Premium: PMI (Private Mortgage Insurance) is a fee (depending on the type of loan) that most lenders require for mortgage insurance. Once you have 20% equity in your home, you can speak to your lender to eliminate this.
Prepaid Interest Fee: This fee covers the interest from the date of purchase (closing) until you make your first payment. This will fluctuate depending on the time of the month you close.
Escrow Accounts: This is an account that will hold funds for the property taxes and homeowner’s insurance. Normally, at closing, you will need one full year of homeowner’s insurance as well as 2-3 months premiums set aside. Taxes will fluctuate based on the time of year the closing takes place.
Recording Fees: This fee charged to record the deed and deed of trust (mortgage). This is a nominal fee.

As a general rule of thumb, closing costs are between 3% – 5% of your purchase. This may vary and you will need to consult with your lender to verify. In some cases, where the buyer does not have these funds, you may ask the seller to pay these funds for you. This normally would require a higher purchase price to offset these fees!