How to Avoid Mortgage Closing Cost Surprises

These may come as a surprise to first-time buyers. You’ve already signed on to pay an entire mortgage and yet here are all these additional fees. Usually these range between 2%-5% of the total home loan and according to a recent survey from ClosingCorp, that amounts to an average of $5,749 for US buyers. 

mortgage closing

What Is Included in Closing Costs

When you buy a home, there are a lot of people involved and a lot of services and paperwork to be done. Your closing costs may include but aren’t limited to:

  • Appraisal fee
  • Inspection fee
  • Loan origination points
  • Mortgage discount points
  • Mortgage insurance premium
  • Prorated real estate taxes
  • Real estate commissions
  • Recording fee
  • Stamp tax
  • Survey fee
  • Title fee
  • Title insurance
  • Courier fee
  • Application fee
  • Escrow fee
  • Credit report fee
  • Homeowners’ Association transfer fee
  • Homeowner’s insurance
  • Underwriting fees

There are a lot of possibilities, so it’s important to find out initially what you’re in store for. Communicate directly with your lender or real estate agent to find out what fees you’ll be subject to at closing.

When to Pay 

There are a few options here and it’s important to remember that buying a home is a negotiation. Depending on how your home inspection goes, you may negotiate with the seller to pay part of your closing costs, or for some repairs to the home. Often, buyers will write a cashier’s check for the closing cost amount and bring it to the final signing (when they receive the keys). Another option is to roll it into your mortgage. Most real estate experts like Paul Daneshrad don’t recommend this because it will cost you more money in the long run. It’s appealing to not empty your pocket and save that money for redecorating or buying new furniture. But, in the long run, you’re going to have to pay interest on that mortgage and that includes closing costs if you rolled them into it.

Don’t Get Blindsided

Talk to your lender and find out exactly what costs to expect, talk to the sellers (or your realtor) and find out what they’ll be paying. That way you’ll have a plan and not panic when you suddenly have to pay thousands of dollars at that final signing.

This entry was posted in Finance.

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