A Home Buyer’s Guide to Closing Costs

The expectations from a buyer for the payment of closing costs is somewhere between 2 and 5%, on average. According to the law, a loan estimation needs to be informed by the lenders regarding the application of mortgage to the borrowers within three days to the buyer.

These estimates are expected to lay down the estimation considered for interest rate, expectations regarding closing costs, and payment that needs to be fulfilled monthly. The presented estimations should come down very close to the final charges that will sum up during the closing, even though they are considered subject to vary.

What is the closing cost for a buyer?

The topics describing the closing costs, who incur them, and how much of it is expected are all covered. So now, let’s move forward with the most common of these fees to be paid by the buyer during the closing.

Property-Related costs

• Home Inspection Fee: On average, $300 to 500 is paid under these fees, and this fee covers the inspection fees. The typical responsibility for ensuring whether a home is in good condition for the buyer lies in the hands of the lender
• Property Appraisal Fee: On average, this cost goes up to $300 to 400 and covers the appraisal cost, appraised by a professional home appraiser and inspected by your lender about the authenticity.
• Escrow Fees: This fee, on average, varies and is paid to the real estate attorney or escrow company and title company as an independent third party to close the transaction.
• Flood Certification: This cost averages $15 to 20 and is required if your choice of home is placed near a flood zone or a floodplain. For this, certification is given from the Federal Emergency Management Agency (FEMA), and documentation done by your lender is required.
• Recording Fee: The average cost varies and is a fee charged by the county recording office or your local city for recording the sale or purchase of a home.
• Property taxes: They normally vary on average, and the buyer holds the responsibility of paying them for two months during the closing.

Loan-related costs

• Loan Application Fee: This fee goes up to $200 to 400 on an average and covers the processing cost of your loan application, including costs like credit check of your lender, which can be negotiated.
• Loan Origination Fee: This fee goes up to 0.5 to 1% of the total loan amount and is charged for the administrative duties by the lender, which is in association with the evaluation and the preparation of your loan. They are also referred to as underwriting and include fees like notary fees.
• Assumption fee: These fees go up to 1% of the loan balance generally on an average and take over the balance remaining from the seller’s loan.
• Discount Points: This amount is paid additionally and is advised only to pay if the buyer plans to stay in the home over a longer period. They are paid to reduce the loan’s interest rate and are delivered to the lender.