How Much Are Closing Costs on a Mortgage?

As you plan to purchase a home, it’s important to keep in mind that you won’t just be paying the cost of the home. You will also be paying “closing costs,” which are all those fees associated with your real estate purchase. Closing costs on a mortgage may be paid by the seller but are most often paid by the buyer and are paid at closing, when you sit down to sign papers and the property title is transferred to you.

WHAT IS INCLUDED IN CLOSING COSTS?

Closing costs on a $300,000 home can range from $7,500 to $15,000, depending on several factors. Fees cover costs incurred by your attorney, lending institution, and appraiser for professional and administrative services. They include:

• • Property transfer taxes,
  • Title search fees,
  • Origination fees,
  • Escrow fees, and
  • Other smaller fees that cover town recording, flood certification, appraisal, credit reporting, tax service, underwriting, rate locks, etc.

Keep reading for a breakdown of each cost.

Title search fees

The second-largest fee is usually the cost of the buyer’s attorney to do the title work, issue title insurance, and conduct the closing on the house. The lender requires basic title insurance, which protects the lender in case there is a lien against the property that the attorney did not find. The buyer may also opt to pay an additional charge for an expanded owners policy (which is not required by the lender). Attorney fees are usually a minimum of $600 to do the title search and $400 for the loan closing. Title insurance, which is issued by your attorney and is based on the loan amount, can add another $500 or more.

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Origination fees

Origination fees consist of optional “points,” paid by the buyer to lower the interest rate, and loan level price adjustments (LLPAs), which are based on the borrower’s credit score and the amount of the down payment amount. These fees can usually be eliminated by raising the interest rate. Your lender will present and explain these fees once he or she has your credit report scores and knows the amount of your down payment.

Escrow fees

Escrow fees are required by some lenders and not by others. If you plan to escrow your property taxes and homeowner’s insurance into your loan, your lender will collect 1/12^th of the annual payment for these each month. The escrow funds will be used to pay the property tax and homeowner’s insurance bills once they become due. Some people prefer to do it this way because it allows them to pay their taxes, insurance, principal, and interest with one check. The downside is that the borrower will need to come up with additional funds at the closing to fund the escrow. The homeowner’s insurance needs to be paid for the first year upfront, and usually, a minimum of six months of property taxes must be paid.

Miscellaneous fees

Other smaller fees collected at the closing include town recording fees, a flood certification fee, an appraisal fee, a credit report fee, a tax service fee, underwriting fees, and rate lock fees. These fees vary quite a lot between lenders, so you will want to shop around to get an idea of what various lenders are charging.

Once you apply for the loan, the lender will give you a loan estimate that lists the different fees. This is usually provided to you within three business days of application. Many online applications offer the loan estimate at the same time that you submit your application.

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About Shari DeLatte

With over 30 years of experience in the banking/finance industry, Shari DeLatte is a mortgage originator who serves the mortgage needs of Vermont families in Chittenden, Franklin, Addison, and Grand Isle Counties. Shari grew up in Colchester, Vermont. She spends her free time antiquing, gardening, and playing cards with friends.

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