💲 How much are closing costs? [2020]

The question about how much are closing costs is a popular one among home buyers. Closing costs are the fees associated with obtaining a home mortgage and are a compilation of expenses from different service providers during the home buying process.

Typical closing costs are about 3% of the total purchase price. For instance, if you are purchasing a home for $200,000, closing costs will be approximately $6,000.00.

• Loan Origination Fee (1% of loan amount)
• Processing Fee
• Appraisal Fee
• Credit Report Fee
• Settlement Fee
• Title Fee
• Recording Fee
• Survey Fee

• Underwriting Fee
• Flood Certificate
• Home Warranty
• Home Inspection
• Pest Inspection
• Radon Inspection
• Roof Inspection
• Lead Base Paint Inspection

• MIP (Mortgage Insurance Premium)
• Prepaid Interest
• 1 Year Hazard Insurance Premium

While it’s impossible to predict every fee included in closing costs, we can offer examples of what to expect. The mortgage lender provides an estimate of the expenses before closing and a more comprehensive list just before closing day.

A Loan Origination Fee is charged by the lender to complete and evaluate the mortgage loan. The amount the lender charges is typically a percentage of the total loan amount.

Sometimes you may see the origination fee charged in mortgage points. In the above example, it would be one mortgage point.

The Processing Fee or Application Fee encompasses lender charges to gather all of the loan information, documentation and creating documents specific to the lender. The loan processor puts in a lot of time and energy processing each loan, and there are several items throughout the process of your investment that the loan processor is responsible for compiling.

The Home Appraisal Fee is a payment made to an independent appraiser to evaluates the home’s worth.  This step is essential for the bank, so they know that the value of the house and can make sure they are not loaning money over the appraised value.

The Title Fee usually refers to the cost of the title insurance policy. Why is it necessary to purchase Title Insurance? Title insurance protects your investment which happens to be the biggest investment of your life.

This coverage makes sure that no one else in the country has a claim to the property you are purchasing. It assures a “clear” or “clean” title.

An Underwriting Fee is charged by the mortgage company to cover the underwriting process for approving your home mortgage loan. This fee is usually between $500 and $1,000.

It’s imperative to perform a Home Inspection on the property that you are purchasing.  The home inspection can range from $400.00 – $600.00. This fee is paid by the lender at closing.

MIP (Mortgage Insurance Premium) is an insurance policy for FHA loans if your down payment is less than 20%. The MIP can pay upfront or distribute over 12 payments in 1 year.

Homeowner’s insurance is required and 12 months of insurance must apply to your escrow account on the day of closing.

Find out home much home you can afford with a quick check using our mortgage calculator.