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Depending on the amount you borrow, loan closing costs usually run about 3% of the loan amount whenever a new loan is being created for the purchase. You can write into the contract that the seller is to pay closing costs, but in effect you, the buyer, are really the one paying the bills, so it makes sense to understand the details. "Closing costs" is a catch-all department and includes a variety of costs associated with the new loan itself: a. the loan origination fee accounts for the bulk of closing costs. This is a fee paid to the lender for taking the loan application, and assembling the "loan package." Typical fee is 1% of the loan. b. the attorney's fee is paid to the closing attorney for the title search (looking at county records to make sure the property is owned clearly) and for physically handling the closing between the parties. Typical attorneys fee for a real estate closing is about $500. c. Some states have special taxes related to real estate transactions. For example, Georgia intangible tax on new loan created is $3 per thousand, which equals 0.3% of loan. Another totally unnecessary tax from your friends at the Legislature, adding up to $300 for nothing. d. Appraisal of the property by a certified appraiser usually costs about $300 for a standard house, but more for non-standard properties like resort homes or mansions. e. A survey of the boundaries of the property and location of the buildings on the lot is the only guarantee the lender has that you are actually buying the house you think you are buying. Plan on about $300, and I recommend that you insist on a survey unless one has been preformed recently. f. The lender will purchase lender's title insurance from the closing attorney. Errors in title are rare, but do happen. This insurance will only protect the lender. Typical fee is about $200. Owners title insurance is available to protect you at a cost of about $2 per thousand of purchase price. I strongly recommend you buy it. g. Miscellaneous charges like tax service fee ($75), credit reports ($50), recording fees ($45), photo fees ($25), document review fees ($95), courier fees ($?), and anything else the lender thinks they can get away with. I call these "junk fees" because they are mostly just gravy for the lender. Try to get out of them if you can. Lenders are required by federal truth-in-lending laws to give you a "good faith estimate" of all the costs you will incur in closing your home loan. Ask for your estimate before you make loan application, and ask which fees are negotiable. Your greatest savings can be in the areas of loan origination, attorneys fees, and junk fees. Get a firm written commitment from your loan originator before you make loan application. And take that estimate to other lenders to compare costs.
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Essentials