Whether you are buying a home or are refinancing, there are fees required to finalize the loan. We lump all these together and call them closing costs. With refinance loans, the closing costs are a bit less because certain elements are missing (such as title fees, home appraisal fees, and other sale-related fees).
This article will focus on the closing costs that you can expect to pay when you buy a property.
Closing costs are about 2% to 5% of your loan amount. So if your loan is for $250k, you can expect to pay about $5,000 and $12,500 in closing costs. Admittedly, this is a fairly large range but we’ll break down the costs so you can have a better understanding of why it varies so much.
Property-Related Closing Costs
Home Inspection: Required with FHA loans and by most lenders, a home inspection makes sure that the home is in an adequate living condition and that there are no significant structural problems with the property.
Home inspection fees range from about $300 to $500.
Appraisal: A home inspection ensures the lender that the home value and amount you are asking to borrow matches. In over words, the house has to be worth the amount you’re asking for. If it doesn’t, then its a bad deal and the loan will not get approved. You can expect to pay a certified professional between $300 and $400 for a home inspection.
Loan-Related Closing Costs:
Application fee: This is the processing fee for the loan application and covers administrative expenses, including credit checks. It varies, depending on the amount of work it took to process your application.
Assumption fee: If the seller has an assumable home mortgage and you take over the remaining balance, you may be charged a fee based on the current balance.
Prepaid interest: Most lenders require payment on the interest that accrues on the loan between the date of settlement and the first payment due date.
Loan origination fee: Also known as an underwriting fee or processing fee. The loan origination fee is charged by the lender for evaluating and preparing your mortgage loan. This can include notary fees and attorney fees. It’ll be about 0.5% of the loan amount.
Attorney’s fees: This is separate from the potential attorney fee in the loan origination and not always required. Certain states require an attorney to be present at the time of closing when the final docs are being signed. This fee varies depending on the number of hours the attorney was needed.
Discount points: Discount points reduce the interest rate you would pay over the life of the loan. The cost of one point is equal to 1% of the loan amount. For example, a loan of $350,000 would be a $3,500 payment. This is an optional fee.
Mortgage Pro Commission: If a mortgage professional assisted with the loan, the broker will likely charge a commission for their service. The commission usually comes as a percentage of the loan and varies as to the amount.
Mortgage insurance fees
Mortgage insurance application fee: If your down payment is less than 20%, you’ll probably have to pay private mortgage insurance. PMI ensures that the lender will recoup the money they loaned you in case you default. The application fee for PMI varies.
Upfront mortgage insurance: Some lenders also require payment for first year’s mortgage insurance premium. Still, others ask for a lump-sum that covers the life of the loan. It’ll be about 0.55% to 2.25% of the purchase price for mortgage insurance, according to Genworth, Ginnie Mae, and the Urban Institute.
Property taxes, Association fees, and Insurance
Property taxes: Buyers typically pay two months’ worth of city and county property taxes at closing.
Association Fees: You might have to pay annual association fees upfront in one lump sum.
Homeowners insurance premium: You might be required to purchase homeowner’s insurance before settlement to cover the property in case of vandalism and damage
Title search fee: A title search ensures that the seller actually owns the house and that there are no outstanding liens against the property. This can take quite a bit of work and costs about $200.
Whether the buyer or seller pays for title insurance varies by region. A discount is sometimes offered when both the lender’s and owner’s policies are
This is not an exhaustive list of all the possible fees associated with your home loan. It may seem like a lot, but remember that what you gain as a homeowner is a lot more. Contact us today to start enjoying all the perks of having a place to call your own.
We've been helping customers afford the home of their dreams for many years and we love what we do.
Company NMLS: 168832
8417 Bergeline Avenue
North Bergen, New Jersey 07047
Phone: (201) 295-1400
Capital Lending Corp. strives to ensure that its services are accessible to people with disabilities. Capital Lending Corp. has invested a significant amount of resources to help ensure that its website is made easier to use and more accessible for people with disabilities, with the strong belief that every person has the right to live with dignity, equality, comfort and independence.
Capital Lending Corp. makes available the UserWay Website Accessibility Widget that is powered by a dedicated accessibility server. The software allows www.capitallending.com to improve its compliance with the Web Content Accessibility Guidelines (WCAG 2.1).
The Capital Lending Corp. accessibility menu can be enabled by clicking the accessibility menu icon that appears on the corner on the page. After triggering the accessibility menu, please wait a moment for the accessibility menu to load in its entirety.
Capital Lending Corp. continues its efforts to constantly improve the accessibility of its site and services in the belief that it is our collective moral obligation to allow seamless, accessible and unhindered use also for those of us with disabilities.
Despite our efforts to make all pages and content on Capital Lending Corp. website fully accessible, some content may not have yet been fully adapted to the strictest accessibility standards. This may be a result of not having found or identified the most appropriate technological solution.
If you are experiencing difficulty with any content on Capital Lending Corp. website or require assistance with any part of our site, please contact us during normal business hours as detailed below and we will be happy to assist.
If you wish to report an accessibility issue, have any questions or need assistance, please contact us by sending an email to: Carlos@capitallending.com