Closing costs are the black hole for many home buyers. Most buyers have little idea what all the charges are for and these amounts can vary wildly. We take a closer look into what you are paying for when you purchase a house, but remember these will all depend on where you are buying, the current market conditions and other factors. Here are some home closing fee guidelines:
- Lender discount points and loan origination or funding fee: 1-3% of the mortgage. Lenders will typically charge about 1% in fees but you can choose to pay more than that in order to buy down the interest rate. If you pay no points, no origination fees, etc. then expect a higher interest rate.
- Loan application fee: $0 to $500 to get the lender to start working on your mortgage.
- Credit report fee: $25 to $85 for each credit report pulled.
- Loan processing fee: $75 to $400 to get the loan put into place.
- Document preparation fee: $50 to $250 for preparing the documents needed at the closing (close of escrow).
- Required property appraisal fee: The lender will hire an appraiser to determine whether the home is worth what you are planning to pay for it. This cost is based on the size of the house and is usually $225 to $450.
- Prepaid loan interest: The interest due on your mortgage is paid in arrears every day until the end of the month in which the closing is held. If you close on the 15th, you will owe 15 days of prepaid interest. If you close on the 29th, you might only have a day or two. That is why closing escrow later in the month is the best way to minimize prepaid expenses.
- Lender’s property insurance escrow: This is 15-20% of the cost of your homeowner’s insurance policy for 12 months.
- Lender’s tax account escrow: If you have a tax escrow, expect to pay about 33-50% of the annual property tax at closing. After closing, the property tax will be part of your monthly mortgage payment.
- Lender’s tax escrow service fee usually $35 to $100 to set up the tax escrow.
- Title insurance cost: will vary considerably, but is based on the price of the house and usually about 0.5% of the home purchase price.
- Specialty title endorsements: these can run $100 each and up.
- Unpaid house inspection fees: $250 to $400.
- Recording fees for deed or mortgage: $25 to $85 each.
- Title company closing fee: $200 to $500.
- Local property transfer tax: this can vary depending on your location and home price. It could be zero or it could be $1,000.
- Flood certification fee: usually required by lenders if your home is located in a flood plain area.
- Attorney fee: flat fee usually around $500, more if you have legal concerns or complications to deal with.
- Homeowners Association transfer fee: most neighborhoods in Phoenix have an HOA transfer charge of about $300 to $400.
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