How Much Are Closing Costs and How to Reduce Closing Costs By Judy Dutton Aug 20 2019

When you get a mortgage to buy a home, you’ll have to pay closing costs: These fees, paid to third parties to help facilitate the sale of a home, typically total 2% to 7% of the home’s purchase price. So on a $250,000 home, you can expect the amount to run anywhere from $5,000 to $17,500.

Both buyers and sellers typically pitch in to cover closing costs, although buyers shoulder the lion’s share of the load (3% to 4% of the home’s price) compared with sellers (1% to 3%). And while some expenses must be paid upfront before the home is officially sold (e.g., the home inspection fee when the service is rendered), and others, like property taxes and homeowners insurance, are recurring, most are paid at the end, when you close on the home and the keys exchange hands.

Home buyers pay the majority of these costs, since many of these fees are associated with the mortgage.

Here are some of the fees home buyers should brace themselves to pay:

• A loan amount origination fee, which lenders charge for processing the paperwork for your loan.
• A fee for running your credit report.
• A fee to underwrite and assess your credit worthiness.
• A fee for the appraisal of the home you hope to own to make sure its value matches the size of the loan you want.
• A fee for the home inspection, which checks the home for potential problems from cracks in the foundation to a leaky roof.
• A fee for a title search to unearth any liens on the property that could interfere with your ownership of it. Title insurance protects the lender and buyer from claims against the home and property.
• Taxes, also called stamp taxes, on the money you’ve borrowed for your home loan.
• Private mortgage insurance is an additional fee that buyers can expect to pay if they can’t come up with a down payment that’s 20% of the purchase price.
• Discount points, or mortgage points, are fees paid right to the mortgage lender in exchange for a lower interest rate. One point is valued at 1% of your mortgage total. It may seem like lot to pay upfront, but doing so will lower your monthly mortgage payment.
• One-time fees may also include: document recording fees for the deed and mortgage, buyers’ attorney fees, real estate agent commission.

Buyers should also account for the following:

• An escrow deposit, managed by a neutral third-party escrow officer, covering typically two months of prepaid property taxes and mortgage insurance payments.

How much can sellers expect to pay?

Here are the fees that sellers are typically responsible for:

• A closing fee, paid to the title insurance company or attorney’s office where everyone meets to close on the home
• Taxes on the home sale
• A fee for an attorney, if the home seller has one
• A fee for transferring the title to the new owner

For information on how to estimate or even reduce closing costs go to bmre.us/tip5