Not every buyer will pay the same amount in closing costs. Some costs are lender requirements, some are government requirements, and others may depend on the situation. How much you’ll need to pay for will depend on where you live, your specific lender and the type of loan you take out. At least 3 business days before you attend your closing meeting, your lender will give you a document called your Closing Disclosure. This will list out every closing cost you need to cover and how much you owe. Let’s look at some of the most common closing costs you might see on your disclosure. Some lenders charge an application fee to process your loan request. This fee varies by lender but can be up to $500. This may be a separate fee or used as a deposit to be applied to other closing costs later. Your lender will order an appraisal through a third-party appraisal management company that’ll send a professional appraiser to take a look at your home and determine how much your property is worth. They’ll do some basic safety checking to make sure the property is move-in ready. Appraisals are important because they set the value of the property, which in turn factors into the amount you can borrow. This also ensures you aren’t overpaying for a property. Appraisal fees are usually in the $300 to $600 range, but they can be higher. In some states, you can’t close on a housing loan without an attorney. Attorney fees cover the cost of having a real estate attorney coordinate your closing and draw up paperwork for your title transfer. Real estate attorney charges depend on your state and local rates. Your closing fee goes to the escrow company or attorney who conducts your closing meeting. In some states, an attorney must sign off on every closing. These costs vary depending on your state and whether an attorney must attend your closing. Courier fees cover the cost of transporting mortgage documents. Expect to pay around $30 in courier fees if your lender charges them. Credit reporting fees cover the cost of pulling your credit report and looking at your credit score. Most credit reporting fees are between $10 and $100. Lenders allow you to pay money upfront on your loan to reduce your interest rate by buying discount points (essentially, buying down your rate to save money in interest over time). One discount point equals 1% of your loan amount. For example, if you get a mortgage for $100,000, one point will cost you $1,000. For a $200,000 loan, a point costs $2,000. Unlike other fees, discount points aren’t mandatory.Application Fee
Appraisal
Attorney Fees
Closing Fee
Courier Fee
Credit Reporting Fee
Discount Points
Your fees for any discount points will appear on your Loan Estimate under origination charges.
Escrow Funds
Sometimes referred to as reserve fees or prepaids, escrow funds hold reserved money for property taxes, homeowners insurance premiums and mortgage insurance. Your lender keeps your escrow funds in a special account and uses them to make payments on your behalf as part of your regular mortgage payment.
At closing, your lender might require you to put a few months’ worth of expenses into an escrow account. Although the number of months depends on your lender, many buyers put down 2 months’ worth of expenses at closing.
FHA Mortgage Insurance
With an FHA loan, you’ll need to pay a mortgage insurance premium upfront at closing. The current MIP rate is 1.75% of your base loan amount.
For example, if you borrow $100,000 to buy your home, your MIP due at closing is $1,750. This upfront payment is separate from your monthly MIP, which ranges from 0.15% to 0.75% of your loan value.
Flood Certification
You will likely need to pay $15 – $25 for a flood certification. This money goes to the Federal Emergency Management Agency, which uses the data to plan for emergencies and target high-risk zones. This closing cost only applies if you’re buying a house in a flood zone.
Homeowners Association Transfer Fee
If your property is located in a homeowners association, your homeowners association transfer fee covers the cost of moving HOA fees from the seller to the buyer. It ensures that the seller is up to date on their HOA dues and provides you a copy of the association’s payment and dues schedule as well as HOA financials.
Most of the time, the seller covers this cost. However, you might need to pay your transfer fee if you’re buying in a very competitive market.
The amount you’ll pay for your transfer depends on your HOA’s policies. If you live in an area without an HOA, you won’t pay this fee at all.
Homeowners Insurance
Homeowners insurance is a type of protection that compensates you if your home gets damaged. Most mortgage lenders require you to have at least a certain amount of homeowners insurance as a condition of your loan to cover damage. You have the option of also getting protection for the contents within your home and liability coverage if someone gets injured on your property.
Many lenders require you to pay a year’s worth of homeowners insurance at closing. As a general rule, expect to pay about $50 a month for every $100,000 in home value.
For example, if you buy a home worth $200,000, you’ll likely pay about $100 per month for homeowners insurance. This means that your lender might require you to pay $1,200 into an escrow fund at closing.
Loan Origination Fee
Loan origination fees cover the cost of processing and underwriting your loan. These fees go to your lender in exchange for underwriting your loan and creating your loan paperwork. Expect to pay about 1% of your loan’s value in origination fees. Along with mortgage discount points, this will show up under origination charges on your Loan Estimate.
Lender’s Title Insurance
Lender’s title insurance protects the lender from loss if you lose your home to a title claim. Unlike with other types of insurance, you only need to pay for lender’s title insurance once at closing.
Lender’s title insurance, which typically costs between .5% and 1% of the mortgage, is separate from owner’s title insurance.
Lead-Based Paint Inspection
If you’re buying a home built before 1979, it might have lead paint. Lead-based paint poses a significant health risk to both adults and children living in a home.
This fee covers a test for lead in the home. Expect to pay around $300 for a lead-based paint inspection.
Owner’s Title Insurance
Owner’s title insurance is optional, but it can cover you in a wide variety of scenarios. A title insurance company will cover you if a previous owner of the property brings a lawsuit against you after you purchase your property.
For example, let’s say a lien on the title of your home is uncovered 10 years after you buy the house. The title insurance company will reimburse you for the amount of your policy. Title insurance costs an average of 0.5% – 1% of the purchase price.
Pest Inspection Fee
In some states, you’re required to get a pest inspection before closing on your loan. Pest inspections are also sometimes required if you’re buying a home with a VA loan. It may be required for other loans as well if the appraiser notes a problem.
The average pest inspection costs about $100. Depending on the situation, the buyer, seller or lender may cover the pest inspection fee.
Prepaid Daily Interest Charges
Your lender might ask you to pay upfront any interest that accrues on your loan between closing and the date of your first mortgage payment. The amount of interest you’ll accrue depends on your loan amount and interest rate as well as your closing date.
Private Mortgage Insurance (PMI)
Your lender will require you to pay private mortgage insurance (PMI) if you put less than 20% down at closing on a conventional loan. PMI protects the lender if you default on your loan.
Your lender might ask you to put down your first month’s PMI premium when you close. The exact amount you’ll pay for PMI depends on your lender, but most homeowners pay $30 – $70 each month for every $100,000 they borrow.
With a conventional loan, you also have the ability to pay for part or all of a PMI policy upfront at closing in order to have lower or no monthly fees for mortgage insurance.
With an FHA loan, you’ll have an upfront mortgage insurance premium plus a monthly MIP fee for the life of the loan unless you make a down payment of 10% or more. In that case, MIP comes off after 11 years. USDA loans have an upfront guarantee fee and an annual guarantee fee that function a lot like PMI/MIP. Rocket Mortgage® doesn’t offer USDA loans at this time.
Property Tax
Property taxes are fees you pay to your local government in exchange for public services. Property taxes fund key institutions such as public schools, roads and fire departments. The amount you’ll pay in property taxes depends on where you live and your home’s value.
Your lender might require you to pay up to a year’s worth of property tax dues at closing. You can estimate your property taxes using public records and your appraisal value.
If you’re buying a home from a family member or friend, you may want to ask them what percentage they paid in property taxes last year. This will give you the best estimate of how much you’ll owe in property tax closing costs.
