Minnesota Real Estate and Mortgage

Mortgage Closing Costs You Should Expect to Pay

Homebuyers should be aware that getting a mortgage encompasses more costs than just the monthly payment. After you sign the sales contract, a series of tasks occur by various people involved in the home purchasing process. These people are compensated through what is known as closing costs. The fees that make up the closing costs pay each of the resources who complete specific tasks once the loan is closed.

The amount of closing costs you have to pay will depend heavily on the region in which you are purchasing a house. Since different areas of the country tax differently, your closing costs will vary. Another reason that closing costs can vary is the fee scale of realtors, attorneys, and lenders which also vary depending on the region.

You can generally expect to pay closing costs in an amount that is between 3% and 6% of the total amount of the loan. For a $100,000 loan, you could end up paying anywhere from $3,000 to $6,000 or possibly more.

Many of the fees associated with the closing costs can be negotiated. Lenders must provide you with an estimate of the fees you will be required to pay within three days of receipt of your application. Once you receive the list of fees, you can negotiate with the lender to reduce or eliminate some of the fees. Some buyers are also to negotiate to have the seller pay some of the closing costs.

Closing cost fees are associated with three major tasks in the home buying process: the cost of getting the loan, the property’s transfer of ownership, and state and local government taxes. Here are some of the costs you can expect to be included in the closing costs:

The processing fee charged by the lender to cover the cost of processing the loan. For example, the application fee and fee to access your credit report.
A loan origination fee to cover work the lender must do to prepare your mortgage. This can be a flat fee or a percentage of the loan.
Discount points can be purchases to decrease the amount of interest you pay on the loan.
An appraisal fee usually required by the lender to ensure the property is worth what you are borrowing to pay for it.
Attorney fees for both you and the lender.
Home and pest inspections
Homeowner’s insurance
Private mortgage insurance if your down payment is less than 20% of the value of the house. This insurance provides protection for the lender in the event that you fail to pay your mortgage.
Prepaid interest since your first payment won’t be due for at least a month and interest begins accruing on the date the loan closes.
Deed recording fees paid to the county clerk.
Title search fees paid to companies to ensure the seller is indeed the owner of the property.
Title insurance is purchased to protect you in the event the title search company made an error in the title search. It ensures that you do not have to pay mortgage if such an error was made.
Closing taxes for three months to a year depending on the state where you live.

Again, make use of your loan officer to fully understand what closing costs you are required to pay. You won’t be able to negotiate out of all the closing costs, but you should attempt to reduce or eliminate at least one of the costs.