What are Closing Costs and How Do You Estimate them?

What are Closing Costs and How Do You Estimate them?

According to a leading data bank/analyst – ClosingCorp -the 2017 nationwide average of real estate closing costs, is $4,876. While it is likely that a national closing cost average may differ in your state, this average is an exact number rather the traditional mortgage tagline of 2% – 7% of the sales price.

The Millennial generation continues to add to the every expanding largest homebuyer group, so, it is important to recognize that:

A NATIONWIDE SURVEY REVEALS 2 OF 3 HOME-BUYING MILLENNIALS ARE PAINFULLY UNAWARE AS TO HOW TO CALCULATE CLOSING COSTS

Millennial, or not, a homebuyer must understand the appropriate sources of closing costs, to enable them to minimize the amount they pay. Begin your research with the fees most often in seen in the state where the property is located. The reality is, state fees, laws and procedures differ widely across the country.

Begin by categorizing the monies required for a borrower to bring to the closing table. And while some closing costs must be paid before the home is officially sold (i.e. a fee for a home inspection), most fees are paid at the closing table.

Fees Directly Related to Financing

These fees vary from state to state (and even sometimes within state borders), as well as lender to lender. Be vigilant and ask about each fee while you are still deciding on which lender to use.

Origination Fees – processing costs, etc.

Credit Report Fees – an algorithmic written report from a credit repository

Underwriting Fees – a bank employee authorized to approve your loan

Appraisal Fees – a neutral, professional paid to offer an opinion of value

Prepaids – Payments Made in Advance of Due Date

Prepaid items (also considered prorations) are paid in advance of their due dates. They include:

  • Homeowners’ Hazard Insurance
  • Flood Insurance, if applicable
  • Prorated Property Taxes
  • Per Diem Mortgage Interest
  • Prorated Water Fees, among others

Legal & Government Fees

  • Title Fees, including abstracts, preliminary title and final insurance policy
  • Survey Fees
  • Recording Fees
  • Documentary Stamps
  • Intangible Tax
  • Deed Transfer Tax

The Take-away

Take note that federal law requires you receive a Loan Estimate sent within 3 days of your applying for a mortgage. As you near closing, federal law then requires the buyer receive a Closing Disclosure. Compare these two estimates and ask your lender why any fee has changed? Be patient and wait until you have an answer before signing any disclosure.

Source

http://www.closing.com/wp-content/uploads/ClosingCorp-Closing-Cost-Survey-Release-_3_252015.pdf