When selecting a lender, you will receive a good faith
estimate for the costs required when closing a mortgage. Because the exact amounts
of these costs can vary, consider these costs in addition to the interest rate
of the mortgage loan.
Typically, the closing costs of a mortgage loan are
between three and five percent of your total mortgage cost. For example, for every
$100,000 that you are borrowing, you can expect your closing costs to be about
$3,000 to $5,000.
To make sure that a lender is not intentionally listing
a good faith estimate much lower than the real costs, get good faith estimates
from two to three lenders.
Below is a list of some of the items you can expect
to see on a good faith estimate for the closing cost of a mortgage loan:
- Lenders Fees may include origination fee (one percent
of loan amount), appraisal fee, credit report, underwriting fee, document preparation
fee, tax service fee and mortgage insurance.
- Title Charges may include title insurance, transfer tax, recording tax and attorney
fees.
- Prepaid Expenses may include Homeowner’s insurance, real estate taxes and
prepaid interest (interest that will accrue between date of closing and the end
of the month).
- Miscellaneous Charges may include property survey and pest inspection.
- Other fees may appear on the closing cost list. Speak to your realtor or closing
agent for more information. Remember, if you get several good faith estimates
(as recommended above), you will be able to get the full scope of closing costs.
Educate yourself and be prepared before you start the home buying process. By
doing this, you will save yourself from being overwhelmed by the true cost of
a mortgage loan.
