Like with any bills and loans, getting a mortgage is filled with additional costs. One of which is the closing cost.
A closing cost is a collection of additional fees excluding your down payment which you have to pay upfront to get a housing loan. While, in most cases, closing costs aren’t that expensive, it’s still essential to learn more about it, especially if you’re planning on buying a house soon.
What is the closing cost?
Mortgage closing costs are fees and expenses you pay when you secure a loan for your home beyond the down payment. These costs are generally 3 to 5 percent of the loan amount.
In most cases, closing costs include title insurance, attorney fees, appraisals, taxes, and more. These categories significantly contribute to your overall upfront payment before getting a housing loan.
What are the things you pay for within a closing cost?
1. Loan Origination Cost
The loan origination fee includes payments for processing and underwriting the loan. This usually costs around 0.8-1% of the overall loan. This process contains underwriting, in which the lender confirms if you’ll be able to repay your loan based on your current financial status.
2. Appraisal Cost
The appraisal and survey fees are used to confirm the current market value of your home. Prices for these services may vary depending on the asset’s current market value. However, in most cases, this usually ranges from $200-500.
3. Title Insurance
Several state policies require that all pertinent documents regarding a specific property be insured. This includes the title of your house. Having title insurance ensures that the property can be bought, resold, refinanced in the future.
4. Escrow Fee
The escrow fee is the payment to your mortgage agent that helped you seal the deal. It mostly depends on the agent and the property company where you bought your house, but it usually ranges around 2-3% of the overall payment.