Buying a home is exciting and once you found the perfect home and and your loan’s been approved, you want to understand what are the ”closing cost” and what it implied.
How Do Closing Costs Work?
At your closing, it will be a time to review and sign loan documents and other paperwork to finalize the home purchase process, as well as to pay some upfront costs.
Your closing costs depending on your lender and the type of mortgage you have may cost thousands of dollars typically 2 to 5% of your home purchase price.
- Closing costs can be paid by you, the home seller, or the lender.
- You may be able to use monetary gifts from family for all or a portion of your closing costs.
How typical mortgage closing costs work:
Within three days of submitting a complete mortgage application, you will receive an estimate of your closing costs that will give you a better idea of how much you need to pay in total. Then, three days prior to closing, you will receive a Closing Disclosure with your final costs, which may include:
- Origination charges for your application and underwritten fees
- Services where we select the service provider for example the appraisal, your credit report, flood determination service, pest inspection, survey, and title search.
- Taxes and other government fees like the recording fees and other taxes. **It is important to remember that the lender has no control over these costs.**
- Prepaids: They are the firsts payments for your homeowners’ insurance, mortgage insurance, and prepaid interest.
- Initial escrow payment: It covers the payment of future homeowners insurance and property taxes
- Other costs will include anything else not covered such as an optional Owner’s Title Policy.