I get a lot of questions from homebuyers about closing costs and what they actually cover. They can look a bit complicated on a disclosure statement, but I’ll explain exactly what you should be looking for today.
First, keep in mind that closing costs are separated into three sections: title charges, lender fees, and prepaid fees.
Title charges include the money you pay to the title company to transfer the home from the seller’s name to yours. It’s not too expensive from the buyer’s point of view, and will typically cost around $920. This will pay for your escrow fee, title insurance fee, and survey fee as well.
Lender fees are a different story. There are many different items here and they can get quite expensive. An origination fee, for example, is usually 1% of the loan amount. Then you have your appraisal fee, application fee, credit fee, and more. You’ll see about $2,500 here for a $150,000 home purchase.
Finally, prepaid fees are items that your lender is requiring you to pay upfront for securities sake. They want two to six months of tax reserves, your annual insurance premium, and prepaid interest. This will cost you another $1,450 on the same $140,000 home.
If you add all of these closing costs up, you’re talking nearly $5,000 on a $150,000 home. That’s not an insignificant amount of money. If you have any questions about your situation or how we can help you lower your closing costs, feel free to reach out via phone or email today. We’d love to hear from you.