All You Need to Know About Closing Costs

With stay-at-home orders being gradually lifted, realtors have started work back up in many states. So if you’re in the market for a new home, don’t forget to budget for closing costs! This includes all fees and charges incurred while officially transferring a property from one owner to another.

Here’s all you need to know about closing costs:

How high will my closing costs be?

Closing costs usually amount to 2-5% of the home’s price. For example, if you’re purchasing a $130,000 home, your closing costs may range anywhere from $2,600 to $6,500.

What kind of charges might I run into as part of my closing costs?

• Application fee: Covers all administrative work required to process your application for a home loan.
• Appraisal: Covers the fee of a professional appraiser to provide your lender with an estimate of your home’s true value.
• Attorney fee: In some states, the closing documents must be reviewed by an attorney before they become binding. This charge covers the attorney’s fee.
• Closing fee or escrow fee: The cost of the title company, escrow company or attorney for facilitating the closing.
• Credit check: Some lenders charge a fee to examine your credit history.
• Escrow deposit: You may be asked to make your initial escrow deposit at closing, covering the first two months of property taxes and mortgage insurance payments.
• Home inspection: The cost of a professional inspection of your entire home and property.
• Homeowners’ insurance: Many lenders require you to pay the first year of homeowners’ insurance premiums at the closing.
• Lender’s policy title insurance: This insurance assures the lender that you own the home and the lender’s mortgage is valid.
• Origination fee: This helps compensate workers involved in marketing for the loan company and those who will help you with the borrowing process.
• Prepaid interest: Most lenders require buyers to prepay the interest that will accrue from the day of closing until the date of the first mortgage payment.
• Primary Mortgage Insurance (PMI): If you need to pay PMI on your loan, the first month’s premium is due at closing.
• Title fees: This covers the cost of a title search, in which your lender hires a title company to look for possible legal claims on your property.
• Underwriting fee: This fee goes directly to your lender. It covers the cost of researching whether you should be approved for the loan.

Should I choose the “no-closing-costs” option?

Before signing up for a no-closing-cost loan, it’s important to understand that there’s no such thing as a mortgage without closing costs. In a no-closing-costs loan, these fees will generally be rolled into the mortgage. You’ll be paying interest on your closing costs throughout the life of the loan. Speak with a Community Financial Mortgage Representative to discuss which mortgage is right for you.

Community Financial is here to answer all of your mortgage questions, whether it’s about closing costs or something else. To get in contact with a mortgage representative, reach out to our Member Contact Center at (877) 937-2328 or visit our online portal anytime at https://cfcu.mymortgage-online.com/.

Your Turn: Have you recently purchased a new home? Tell us about the closing costs you encountered in the comments.