Buying a home has many costs associated with it—not just the down payment, but also the closing costs. In fact, many buyers, especially first-time home buyers, are often surprised at how quickly the closing costs can add up. The average closing costs percentage is about 2% to 5% of the purchase price, but 3% to 6% is certainly not uncommon.
Here are the typical closing costs buyers are responsible for. Since exact fees vary widely based on location and lender requirements, talk to your mortgage banker for specific details.
Lender Related Closing Costs
- Credit Report
- Private Mortgage Insurance: If your down payment is less than 20% of the purchase price, lenders require this insurance to protect their interest in the home.
- Initial Interest: This covers the interest from the date you close until the end of the month.
- Document Preparation Fee
- Lender’s Title Insurance Policy: This is a title insurance policy that protects the lender’s mortgage interest in the property.
- Wire Transfer Fees: Most lenders fund the transaction via a wire transfer versus a check.
Other Closing Costs Potentially Required by Lenders
- Home Appraisal
- Homeowner’s Insurance: Lenders and insurance companies require payment of the first year’s homeowner’s insurance to protect against natural and manmade disasters.
- Flood Zone Certification
Title Related Closing Costs
- Homeowner’s Title Insurance Policy: This protects your interest in the real estate from claims of ownership or other interests by others. While this is optional, the cost of the lender’s premium goes up without the purchase of the homeowner’s title insurance policy, so it is not cost effective to forgo it.
- Settlement Fee: This covers the title company’s services.
- Document Preparation Fee: Charge for the cost of preparing legal papers.
- Government Recordation Charges
- Proration of Property Taxes: Expect to pay the property taxes from the date you take ownership to the end of the year.
While closing costs do add up, the good news is that most of them are one-time fees. That means you’ll never have to pay them again until you buy another home. Any recurring fees, like taxes and insurance, can be escrowed into your mortgage payment.
When you’re ready to begin your mortgage application, contact us. As mortgage bankers, we can help you make the best decision for your needs.
When you’re ready to apply for a mortgage or refinance an existing one, contact us at 707-254-8891 or [email protected]. We can also direct you to the perfect real estate agent to help you.
Have Questions, Reach out to me for more information.
Call me at (707) 254-8891
Hilda Hensley Branch Manager – Mortgage Advisor
NMLS id 280206
Benchmark Mortgage
Ark-La-Tex Financial Services, LLC NMLS id 2143
