How to Calculate Closing Costs: 16 Examples of Closing Costs

In real estate, closing costs refer to the small fees that homebuyers incur when setting up or closing a new mortgage. The two most common occasions for closing costs are purchasing a new home or refinancing your loans. Closing costs usually include a combination of title fees, lender fees, property fees, and insurance fees.

Lenders are legally required to offer borrowers an estimate of mortgage closing costs, itemized in a loan estimate document or closing disclosure. While you can opt to pay each fee individually, borrowers often choose to pay closing costs as a simple one-time lump sum into an escrow account. From there, the escrow agent can distribute the correct amounts to each party.

Closing costs include many smaller fees. Here are some common examples:

1. 1. Appraisal fee: An appraisal fee is the cost of having a certified professional appraiser evaluate the property’s market value (usually between $300 and $400).
2. 2. Attorney fees: Attorney fees are the cost of having an attorney oversee the sale, required by some states. This fee varies by attorney.
3. 3. Discount points: Discount points, also called discounts, are an optional fee that some homebuyers pay to reduce their mortgage interest rate (usually around one percent of the home loan amount).
4. 4. Escrow fees: Escrow fees are the costs associated with having a third-party escrow company manage the closing (usually between $300 and $1,000). The company will assign an escrow agent to manage your account and ensure timely fund distributions.
5. 5. Federal loan fees: If your down payment is under 20 percent and you secure a loan through a federal loan program—such as Veterans Affairs, the Federal Housing Administration, or the US Department of Agriculture—you’ll need to pay a special mortgage insurance premium or guarantee as a form of default protection. These premiums or guarantees, respectively known as VA, FHA, or USDA loan fees, usually add up to between one percent and three percent of the loan.
6. 6. HOA fees: HOA fees are regular dues that condo and homeowners pay within neighborhoods run by homeowners associations, which ensure homeowners adhere to ground rules for specific issues, like maintenance, home design, and conduct. In certain areas, these fees are an upfront requirement for new homeowners.
7. 7. Home inspection fee: The home inspection fee is the cost of having a certified inspector evaluate the property for potential problems (usually between $300 and $500).
8. 8. Homeowners insurance: Homeowners insurance is a standard fee that homeowners pay to protect their homes from incidents like damage or theft. During closing, a homebuyer often pays up to a year’s worth of homeowners insurance premiums (usually between $400 and $1,000).
9. 9. Loan application fee: A loan application fee is the cost of applying for a new loan, including credit report fees.
10. 10. Loan origination fee: Also called the underwriting fee or processing fee, the origination fee is the cost of having your lender prepare and process your mortgage loan. Some lenders may not charge for origination and instead, fold this fee into the loan amount via a higher interest rate. This fee is among the highest closing costs, usually between 0.5 and one percent of the home loan.
11. 11. Mortgage broker fee: The mortgage broker fee is the cost of having a mortgage broker help you find and secure a mortgage loan (usually between 0.5 percent to 2.75 percent of the home loan).
12. 12. Mortgage insurance application fee: If the homebuyer makes a down payment of less than 20 percent of the home’s value, they’ll have to apply for a private mortgage insurance policy (PMI policy) to insure the mortgage. The application fee for the insurance policy is wrapped up in the homebuyer’s closing costs (usually between $150 and $500).
13. 13. Prepaid interest: Prepaid interest is the value of the mortgage interest that accrues between the closing date and the first monthly payment.
14. 14. Prepaid property taxes: During closing, a homebuyer usually pays two months of local property taxes upfront, called prepaid property taxes.
15. 15. Survey fee: The survey fee is the cost of professionally assessing property lines (usually around $400) and is usually not a requirement for homeowners.
16. 16. Title fees: Title fees refer to costs associated with the house title. A title company may charge for a title search, title insurance, recording fees, and transfer taxes to guarantee the seller has the legal right to sell the property (usually between $200 and $2,000).

Closing costs are determined by several factors, including the final sale price of the home, your credit score, the size of your down payment, the real estate location, and your specific mortgage lender. Average closing costs in the US range from around $2,000 to up to $13,000.

To calculate your closing costs, most lenders recommend estimating your closing fees to be between one percent and five percent of the home purchase price. If you’re purchasing your house for $300,000, you can estimate your total closing costs to be between $3,000 and $15,000. You can also use an online closing cost calculator to get a more accurate estimate that factors in your area and down payment.

All investments, including real estate investments, come with inherent risks which may involve the depreciation of assets, financial losses, or legal ramifications. The information presented in this article is for educational, informational, and referential purposes only. Consult a licensed real estate or financial professional before making any legal or financial commitments.

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