What Are My Closing Costs?
When you qualify for a mortgage, you're going to end up having to pay closing costs. Closing fees or closing cost relates to the buying price of the house which is charged by the lenders and third parties. In addition to bearing the down payment, the principal and the interest, you also have those additional fees that are typically paid at the time of closing. Usually, closing costs are the responsibility of the buyer. A first time home buyer can make his/her work easier by using closing costs calculator.
What Makes Up the Closing Costs?
Closing fees can vary quite a bit, depending on the type of property you buy and where you buy it, but frequently include things like:
- Attorney's fees
- A fee for checking your credit report
- A loan origination fee, which covers the cost of processing the paperwork for the loan
- An appraisal fee
- Charges for any inspections that might have been required by either the buyer or the lender
- Discount points - fees that are paid in return for a lower rate of interest
- Title insurance
- Survey fees
- Title search fees, to ensure that there are no unpaid mortgages or tax liens on the property
- Recording fees, paid to the county or city
- Escrow deposits
- Underwriting fees
- Pest inspection fees
This is just an overview of some of the more common things that can make up the closing costs - it's not meant to be all-inclusive, since closing fees can vary considerably. So the use of closing costs calculator really benefits a loan- searcher.
How Much Will I Pay in Closing Costs?
Usually, a home buyer will end up paying somewhere between 2% and 5% of the buying price of the home. So, if the home costs $150,000, the buyer could end up paying somewhere between $3,000 and $7,500 in closing costs. Generally speaking, closing fees in the neighborhood of $4,000 seem to be the norm.
Under the law, your lender is required to provide you with a GFE (good faith estimate) of what the closing costs on the procurement of your home are expected to be, within three days of your loan application. Legally, however, the fees that are listed on the GFE can change by as much as 10%. What this means is that thousands of dollars could end up being added to your final closing fees. Closing costs calculators can prove to be of much use in making accurate estimations about this type of fees.
Within one day of closing, the lender will give you a settlement statement (HUD-1), itemizing the closing fees. You'll want to compare this with your GFE, and request an explanation as to each item on the list of closing costs, and why it's required. Sometimes, the fees are negotiable, and sometimes they're actually totally unnecessary. So don't be afraid to question things like high administrative fees, and if you feel that the closing costs are too high, don't be afraid to walk away. Make a good use of closing costs calculators and find another lender who might be more reasonable about closing costs.
Can I Avoid Closing Costs?
There is such a thing as a "no closing cost" mortgage, but you could end up just absorbing the costs in other ways. For instance, you might be charged a higher rate of interest on the loan, , or the closing costs may be simply rolled into the principal, in which case you actually end up paying interest on your closing fees. In some circumstances, you might be able to negotiate with the seller, and have them cover some of the closing costs. So the idea of trying a hand on closing costs calculators might be a great step as an advance preparation.