Here is a more in-depth closing cost calculator which highlights individual fees you can expect to pay. This calculator allows you to select your loan type (conventional, FHA or VA) or if you will pay cash for the property. It will then estimate your total expected closing costs. This is an estimate of how much you will need on the day your home purchase is made. Please remember that this is an estimate, the actual fees and expenses may change depending on a variety of factors including the actual closing date. Below the calculator is a summary of the inputs and calculations used to create this estimate.
Depending on a variety of factors, closing costs typically range between 2% and 5% of the home purchase price. Here is a basic calculator which you can use to see your estimated range.
In the United States average closing costs for homeowners are about $3,700, though that depends heavily on home price and location. You can get a more detailed breakdown of your local market conditions by using this map.
Some lenders advertise "no closing cost" loans, however this means these costs are rolled into the rate of interest on the loan. A small change in interest rates can add up to a substantial sum over the course of 30 years. For your convenience here is a table of current local rates.
|Fee||Rough Cost||$250,000 Home Est.||Paid to||Background|
|Origination Fee||1%||$2,500||Bank||Covers the cost of making the loan. This fee may be negotiable.|
|Discount Points||0% to 3%||$0 to $7,500||Bank||Homeowners can pay an upfront sum to lock in a lower rate of interest if they know they will be living in a house for an extended period of time.|
|Credit Report & Loan Application||$25 to $400||Bank||This fee is rather easy to waive given how small it is relative to other expenses.|
|Private Mortgage Insurance (PMI)||0% to 1%||$1,853||Bank's Insurance Company||This monthly payment protects the bank against the risk of loan non-payment. It is only required on a typical conforming mortgage if you pay less than 20% down until you have at least 22% equity in the home, or 20% equity and you request the fee removed.|
|First Interest Payment||0% to 1/12th APR||$500||Bank||This covers the interest fee from the date your loan is closed until your first regular monthly payment.|
|Title Services & Title Insurance||$275 to $5,000||$1860||Title Company||Title insurance is a required purchase to protect lenders against claims on a home.|
|Property Taxes||0% to 2%||$400||Local Government||The local property taxes are due yearly & depend HEAVILY on the location & the municipal budgeting for large expenses like new schools. Some banks may roll these directly into your loan payment. Accrued property taxes which are still owed on the home may need to be paid.|
|Appraisal||$150 to $400||$350||Appraiser (by the bank)||Banks verify the value of homes before lending against them.|
|Survey||$150 to $400||$350||Survey Company||Used to verify & draw the boundaries on the property.|
|Homeowners Insurance||$450 + 0.2%||$950||Insurance Agent||Protects your home from common issues. Some problems like flooding may not be covered by homeowner's insurance.|
|Government recording fees & transfer taxes||$25 to $1,400||$50||Local Government||Recording a property sale has an associated documentation fee, but some locations also charge sales tax and/or transfer tax.|
Home buyers face wide-ranging concerns, from locating suitable properties to successfully closing deals. The intimidating process is wrought with details, so understanding basic financial principles helps buyers reconcile the monetary aspects of real estate purchases. Although cash sales do occur among well-funded buyers, in practice, most would-be home owners require outside financing when closing a transaction on real property.
The process of obtaining mortgage financing and transferring property ownership incurs costs, which must be settled, before a transaction is considered complete. The total amount paid toward closing costs varies, according to conditions surrounding each deal, yet most buyers experience similar fees and charges. Generally, the total amount paid for closing a residential real estate deal represents less than 5% of the home's purchase price.
Many of the standard closing costs are fixed, so buyers pay the same amount, regardless of where financing is obtained. Registering deeds and documents, for example, is typically done for a flat fee. Some ancillary expenses, on the other hand, are negotiable and subject to the discretion of lenders and other real estate transaction partners. It is important for buyers to know the difference, and to understand where closing costs originate.
Recent difficulties within the mortgage industry ultimately changed the way lenders do business with their clients. In order to protect home buyers from financial distress, legal mandates now require very specific financial disclosures during the application and closing process. The transparency hedges against surprises and misunderstandings, empowering consumers to make informed mortgage decisions.
Know Before You Owe is a Consumer Financial Protection Bureau (CFPB) initiative designed to simplify the mortgage lending process for applicants. By requiring standardized disclosures, the government oversite agency ensures mortgage companies operate fairly and provides documentation buyers use to compare terms and select financing. The updated program continues consumer protection once covered by policies mandating a Good Faith Estimate (GFE) and Truth in Lending Disclosure for each loan application. Once approved, each mortgage was finalized using a fresh Truth in Lending Disclosure, as well as a HUD Settlement form.
Under Know Before You Owe, two required documents replace the four disclosure forms once used. The Loan Estimate and Closing Disclosure are now used by lenders to estimate and convey the cost of borrowing, outlining customary fees and charges on an easy to follow, standardized document. Loan estimates provided upon application account for the predicted cost of various application charges, documentation expenses and closing costs, including loan origination fees, which are easily compared using the form.
The estimated cash to close section provides a snapshot of potential closing totals, establishing a baseline for lending organizations, which typically require proof an applicant can cover the charges. As transactions are consummated, buyers provide a cashier's check or wire transfer to pay for the actual cost of closing. These figures are provided within the Closing Disclosure, which serves as a finalized form of the preliminary estimate document.
The most substantial resource required for home ownership is the down payment required to initiate financing. But money down is not the only up-front expense associated with a home purchase. In order to finalize sales, the buyers (and sometimes sellers) are on the hook for various expenses accrued during the transfer process. Closing costs commonly include the following fees and expenses:
In addition to lender fees and other costs of conveying real estate, buyers are responsible for certain recurring costs tied to the property. To ensure an equitable transition, the closing process accounts for expenses once paid by the seller, which will be transferred to the new property owner.
Mortgage financing is regulated to protect home buyers. As a result, hidden charges and unanticipated expenses are largely absent from legitimate real estate transactions. In addition to the customary charges listed above, some lenders add processing fees, administration fees and commitment charges to their mortgage estimates. However described, the costs must be clearly outlined prior to closing, empowering informed consumers to comparison shop for residential financing.
Through research and negotiation, committed mortgage seekers can trim costs, without sacrificing timely closing proceedings. And with standardized documentation in place, expectations and closing budgets are clearly defined. In total, closing costs commonly represent 2-5% of the value of a mortgage, depending upon the size of the loan and its terms and conditions. In some cases, the costs are rolled-in to the mortgage and paid over time, but it is more common for them to be paid out of pocket at a formal settlement meeting.
If you are in the mortgage market, use truth in lending to your advantage, shopping the best rates and services. In many cases, pre-existing customer relationships, with your bank or credit union, for instance, furnish workable resources. In practice, anticipating the cost of closing helps you determine what you can afford, so it is never too soon to account for the true cost of becoming a home owner.