Whether you’re a buyer or a seller, the whole business of closing costs can both confusing and intimidating. And then there’s the aggravation for buyers of having to pay closing costs on top of the tens or hundreds of thousands of dollars they paid for the home, sometimes as much as 5%, and for sellers of losing that amount if they wind up having to pay closing costs. So to make it a pill that’s a little easier to swallow, here’s a breakdown of closing costs for homes in [market-city] according to the various aspects and segments.
Loan Costs
APPLICATION FEES
To cover the cost of processing the application, along with credit checks, your lender will require a loan-application fee. The amount of this fee varies by lender and amount of time and work involved. In addition, if you make a down payment of less than 20%, you may also have to get private mortgage insurance, and that will require an application fee as well.
ORIGINATION FEE
The origination fee (also known as an administrative fee or underwriting fee) is the largest of the loan costs and a good percentage in the breakdown of closing costs for homes in [market-city]. The origination fee’s purpose is to defray the lender’s expenses involved in evaluating and preparing the mortgage loan, including notary fees, attorney fees, and document-preparation costs. Generally, it amounts to about 1%of the loan amount.
UPFRONT INSURANCE
Lenders sometimes require an advance payment of the first year’s mortgage-insurance premiums, which usually ranges from 0.55% to 2.25% of the sale price.
PREPAID INTEREST
Most lenders will also require payment of the interest accruing during the period from the date of settlement to the due date of the first monthly payment.
Property-Related Costs
APPRAISAL
Your lender will certainly require an appraisal – and inevitable part of the breakdown of closing costs for homes in [market-city] – to ensure that the home is, in fact, worth the amount you want to borrow to purchase it. This protects the insurer in case of default. The cost of an appraisal by a certified appraiser usually runs around $300 to $500.
INSPECTION
It’s also pretty certain your lender will require an inspection to make sure the house is structurally sound, up to code, and has no major problems, again ensuring their protection if you should default. The average for home-inspection fees is in the range of $300 to $500.
Title-Related Fees
TITLE SEARCH
The lender will have to determine that the seller does, in fact, own the home and that there are no liens against the property. This is the purpose of a title search, and the cost is generally about $200.
TITLE INSURANCE
Most lenders also require title insurance as protection against errors in the title search that would allow people other than the seller claim ownership after the deal has been finalized.
Insurance, Taxes, and Association Fees
INSURANCE
Your lender will most likely require you to have homeowner’s insurance before settlement so that their investment is protected against any kind of damage or loss. The cost varies depending on a number of factors but is always higher in areas vulnerable to natural disasters like floods. This often comes as a surprise to many people when first encountering the breakdown of closing costs for homes in [market-city].
PROPERTY TAXES
Also, you can generally count on paying a minimum of at least two months’ worth of both city and county property taxes. The amount could range from relatively little to something pretty hefty, depending on the size of the home and the area.
HOA FEES
Another frequently unexpected piece in the breakdown of closing costs for homes in [market-city] is the fact that if you buy where there’s a homeowner’s association in place, you may have to pay the annual fee ahead of time in one lump sum at closing.
Closing costs are not insignificant, but this breakdown of closing costs for homes in [market-city] may help you understand why. The best way to safely navigate the minefield of closing costs is with the help of a qualified real estate professional.