The closing costs on a mortgage include the fees and charges for all the services needed to successfully purchase your home. The total can be about 3% to 6% of the purchase price, depending on the home value and where you live.
Closing costs may be divided into two types – costs related to the property and costs related to the mortgage loan.
Property-related closing costs may include:
- Appraisal fee to determine what the home is worth.
- Home inspection fee to evaluate the home before closing (an optional but recommended service)
- Title search to ensure there aren’t any issues with the title of the home, such as a tax lien.
- Title insurance to protect your lender in case there are issues with ownership after the sale.
- Prepaid taxes – you may need to pay six months to a year’s worth of property taxes in advance at closing.
- Settlement fee – fee for settlement agent to close your loan
- Homeowner’s insurance – 12 mos upfront and 3 mos in escrow account
- Prepaid interest – interest from the day of closing until the end of the month (under mortgage cost)
Mortgage-related closing costs may include:
- Credit report fee to check your credit report and score.
- Origination fee or commitment fee for creating the loan.
- Points can be paid upfront to lower the interest rate on your mortgage – this may raise your closing costs but reduce the amount of total interest you pay over the life of your loan.