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.

πŸ’² How much are closing costs?

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.

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πŸ“‹ What are lender fees?

  • Loan Origination Fee (1% of loan amount)
  • Processing Fee
  • Appraisal Fee
  • Credit ReportΒ 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

⚠️ What are prepaid items and escrows?

  • 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.

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❓ What is the Loan Origination Fee?

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.

For example, on a $200,000 loan, a 1% loan origination fee is the charge which equates to $2,000.00. This fee is part of what makes up the closing costs.

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

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⌨️ What is a Processing Fee?

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.

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πŸ’΅ What is the Home Appraisal Fee?

The Home Appraisal Fee is a payment made to an independent appraiser to evaluates the home’s worth. Β 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.

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🏒 What is the Settlement Fee?

Settlement Fee or Closing Fee is the fee to the title company for performing the settlement and closing of the mortgage.Β  The buyer and seller typically split the settlement fee 50/50. This fee varies per loan and title company.

πŸ“ƒ What is the Title Fee?

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.

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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.

πŸ“‘ Is there a credit report or recording fee?

There may be a small fee for pulling your credit report that is usually around $25.00. The recording fee is payable to the county where the property is located when the deed is filed after the home is purchased.

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πŸ“ What is a Survey Fee?

The survey completed on your property is required by the mortgage company to show the property lines, and this amount is payable to the surveyor within the closing costs as the Survey Fee.Β If you want to add a fence to the property at a later date, you may want to consider a Stalked Survey.

🏦 What is an Underwriting Fee?

An Underwriting FeeΒ 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.

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πŸ•΅οΈβ€β™€οΈ What are Home Inspection Fees?

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

The home inspection can include but is not limited to structural, mechanical, electrical, plumbing, pest inspection, radon gas test, and lead base paint test.

βž• More on Prepaid Fees & Escrow Items

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

Prepaid Interest is prorated interest calculated from property taxes for the rest of the month after your loan closes. If you close on April 4th, you are responsible for the property taxes starting April 4th.

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

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How Much are Closing Costs?
Article Name
How Much are Closing Costs?
Wondering how much are closing costs when you buy a home? Check out this list of possible fees to get a good idea of what to expect at closing.
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RL Real Estate
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