Mortgage closing costs are what you pay to close your loan application. This subject can get rather in depth, so what I’ll do is, over the next few days, post updates explaining the different fees and costs to help you understand exactly what you end up paying and what you get for that. Be sure to keep checking back here for updates this week. Also, you can follow my Facebook and Twitter updates to make sure you don’t miss a thing.
So, where do these closing costs go? Some costs and fees go to third parties, some are state and local government fees that must be covered and some go to your lender. Top of Form
Closing cost cover the services that must be performed to process and close your loan. At the time you apply for a loan, lenders are required by law to disclose to you, in writing, what the estimated mortgage closing costs will be. This is known as the Good Faith Estimate, once disclosed these cost cannot be increased by the Lender to the Buyer for that home.
Closing costs can vary by mortgage option and amount, so the costs on a 30-year fixed or a 15-year fixed may not be exactly the same as a FHA or VA Loan which allow up to 6% max seller paid concessions while Conforming loans allow a maximum of 3 % concessions of what a seller can cover as what is labeled closing cost.
Outside of the down payment which we are not including as closing cost, the down payment is just that, the down payment. These can be zero down for VA loan and as low as 3.5% for FHA loans and 5% or more for conventional loans. There are other costs and fees associated with your home purchase outside of the closing cost which are the inspections and appraisals cost that your borrower needs to have those monies readily available.*
Average closing costs that can be written into your purchase agreement is generally range from $2,500 to $5,000 of your loan – this is a sizable amount of money when you consider this is paid upfront at closing. But where exactly does it all go and where is it coming from?
A common misconception about mortgage closing costs is that they all go to the lender, when in reality; many of the costs are related to services performed by others, which the Mortgage Broker is overseeing on the buyer’s behalf. Mortgage closing costs cover expenses associated with getting a home loan include the cost of a title company and its title insurance cost, the first years home owner policy and property taxes and if the buyer is setting up escrows for the loan or not. It is important to check your lender fees and closing costs carefully. If a lender boasts incredibly low rates, it’s possible they will try to make up the difference with exorbitant lender fees. If the fees are unusually low, then the rate maybe higher to compensate. We offer a no closing cost option, but that is your choice once we determine your needs and financial considerations.