How Much Are The Closing Costs?

One of the first questions I often hear from first-time homebuyers is “How much are the closing costs?”

Every purchase is different, so there is not one set amount. Typically closing costs run 2%-4% of the purchase price. Depending on the type of program you qualify for, your credit score may be a factor.

The following is a list of fees that you will typically see:

• Origination fee
• Appraisal
• Documentation fee
• Title services and insurance
• And the survey

You also have pre-paid items. These items include pre-paid interest, start-up of your escrow account for taxes and insurance, and PMI insurance (if applicable). Maybe you decided to purchase points to get a lower rate. This is also collected at closing.

To help you better understand and be prepared so there are no surprises, you will be provided with several disclosures early on. These are required by law and are there for your protection. The most important are the Loan Estimate and Your Home Loan Toolkit.

Three days after your application is submitted, you will receive the Loan Estimate (LE). This is a summary of your mortgage terms, projected payments, closing cost details, and additional information about the loan. This is only an estimate and the actual charges may differ. The estimate defines limits on how much certain fees can change between the estimate and the actual costs. You can evaluate your mortgage application and even explore other possibilities before accepting.

Keep in mind the mortgage tax savings you may be entitled to, but be sure to consult your tax advisor as there are limitations. Points paid on acquisition for a residence are fully deductible in the year they are paid. Thereafter, interest paid on a mortgage is tax-deductible if you itemize on your tax return. These tax savings can affect the effective APR. Again, be sure to consult your tax advisor on these issues.