When you’re purchasing a home, the down payment isn’t the only money you’ll need to have available. Homebuyers will be expected to pay certain fees and costs at the closing of the deal. If you’ve never purchased a home before, then these costs may come as a bit of a shock. And if you don’t have the extra money, you could risk losing the deal. Let’s take a look at some of the most common closing costs that homebuyers should be prepared to pay.
Home inspection fee
Your lender will probably require a home inspection that assesses the condition of the home. The average cost for a home inspection ranges from $300 - $500.
Is your property worth what you’ve agreed to pay for it? Your lender will want to know and will schedule an appraisal of the property. You can expect to pay between $300 and $400 for the appraisal.
You will be charged a fee for filling out a mortgage application to cover administrative costs and credit checks. The cost of the application fee will vary from lender to lender depending on how involved the application process is.
Loan origination/underwriting fee
The loan origination or underwriting fee is one of the more expensive fees you can expect to pay at closing. It covers the work involved to evaluate and prepare your home loan, including document preparation and notary fees. Generally, you will pay approximately 0.5 percent of the amount of your loan.
You will most likely be required to pay the interest that accrues on your home loan between the closing date and the first monthly payment. This amount will vary depending on the size of your loan and the interest rate.
If you live in a state that requires an attorney to be present at closing, then you will also be on the hook for those fees, which are usually calculated by the hour.
Mortgage broker fee
Did you work with a mortgage broker to find a loan? Then you will be required to pay the broker’s commission fee, which is usually a percentage of the purchase price. Typically you can expect to pay anywhere from 0.5 to 2.75 percent.
Mortgage insurance application fee
If you secured a loan that does not require a 20 percent down payment, then you will need to have private mortgage insurance. The cost of the application will vary by lender.
If you need mortgage insurance, you will pay up front for some or all of it, depending on your lender. This fee is usually between 0.55 and 2.25 percent of the purchase price.
Did you get an FHA, VA, or USDA loan? Then you will need to pay guarantee fees for these loans. Check the loan program for specifics.
Yes, you’ll be on the hook for property taxes at closing. You will usually pay two months’ worth of city and county property taxes.
Homeowners insurance premium
You will probably be required to secure homeowners insurance before you close. The amount of your premium will vary from location to location.
Title search fee
When you purchase a home, a title company will perform a title search to make sure there are no claims or liens against it. The fee for a title search is generally about $200.
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