Many new first-time home buyers don’t realize that there are other expenses besides the down payment. One of these extra expenses to look out for is the closing costs.
Closing costs are significant fees you should know about if you consider applying for a mortgage.
So what are closing costs?
Closing costs are fees that the home buyer must pay to close your loan. It usually includes property taxes, appraisal fees, professional fees, and other miscellaneous items – we’ll discuss more of this later.
Suppose you want to know the closing cost of your mortgage. In that case, your lender must provide you with a loan estimate outlining the closing costs you should expect to pay on the property you purchase.
How much are closing costs?
According to ClosingCorp, a real estate data firm, the average closing cost varies for each state. However, buyers should expect to pay between 1 to 5% of the home’s purchase price.
The states with the highest average closing costs, including taxes, are:
- Washington D.C. – $30,352
- Delaware – $17,831
- New York – $17,582
- Washington – $13,910
- Maryland – $12,056
The states with the lowest average closing costs, including taxes, are:
- Wyoming – $2,510
- Kentucky – $2,556
- North Dakota – $2,321
- Inidiana – $2,193
- Missouri – $2,102
Other factors that determine the total closing costs aside from location include the property’s price and the type of mortgage loan program you choose.
What are the common items included in the closing costs?
Each homebuyer’s closing costs are different, but we’ve compiled a list of the most common ones. Here are some common items you can often expect to see:
Application Fee: Your mortgage lender may charge a fee for processing your loan application.
Real estate attorney fee: Hiring an attorney is advisable to oversee the sale of a piece of property legally. Although, not all states require an attorney to handle a real estate transaction.
Homeowners insurance: This is required to protect the home from possible damages. You must pay the first full year of insurance at the closing – usually between $400 and $1,000.
Home appraisal fee: An appraiser is required to assess the home’s fair market value. Lenders also require this before approving your loan amount.
Credit Report Fee: Lenders need to check your credit score with the three major credit agencies: Experian, Equifax, and TransUnion, before approving you for a home loan.
Title insurance and search fee: This fee is charged to ensure no other party besides the seller has a claim to sell the property. The title insurance protects you against future property ownership disputes.
Other fees included in your closing costs will be itemized on your loan estimate and closing disclosure.
Do you have more questions about closing costs? It is essential to talk to an experienced mortgage broker about these fees and why they are necessary.
Belay Mortgage Group is a mortgage company in Vancouver, WA. The experienced mortgage advisors at Belay will help you at each step of your home loan application!