Typical Closing Cost Fees
If considering a mortgage loan or refinance, sit down with your mortgage lender in the beginning and discuss possible fees. Every home loan involves closing costs that are paid to the mortgage company. Buying or refinancing a home without planning for this expense can stall the process. Know the average cost to acquire a mortgage and consider options for paying this expense before meeting with a lender.
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Purpose of Closing Costs
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Servicing and processing a mortgage loan isn't cheap for the mortgage lender, and they often have to rely on third party sources to complete the process. Rather than have borrowers pay for each individual service at the time of completion, lenders wrap the entire cost into one fee at closing.
What's Included in Closing Costs?
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Closing costs include the fees for various services provided by the mortgage lender and third-party agencies for processing the mortgage application. These include the lender's fee to originate the loan (approximately 1 percent of the loan balance), attorney fees, credit report fee, title search fee, fees for discount points and the home appraisal.
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How Much are Closing Costs?
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There is no flat fee for closing when buying a house or refinancing a mortgage loan. But according to Bankrate.com, closing costs on a mortgage home loan can cost between 3 and 5 percent of the loan balance. Prepare in advance and plan to spend the higher of both percentages on closing fees.
Closing Fee Reduction
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Options to reduce closing costs on a mortgage loan are available, and getting a reduction involves talking with your home loan lender and discussing possible alternatives. If applying for a refinance, there are advantages to refinancing with your present mortgage company. To keep you as a customer your lender may reduce or waive the loan origination fee. This can save you $2,000 in closing costs on a $200,000 loan balance.
Other Options to Manage Closing Costs
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Discount mortgage points are attractive because they help buy down the interest rate on a mortgage loan. But instead of paying discount points, which equal 1 percent of the loan balance per point (paid at closing), take the higher mortgage rate on the loan and pay less out-of-pocket at closing. What if you don't have any cash for closing? A feature called "no-cost" mortgage loans eliminate the need for a large cash payment at closing. If approved, lenders roll the costs of closing into the loan balance.
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