What Are Closing Costs?

What Are Closing Costs?

Closing costs are the actual expenses that the mortgage lender incurs in the origination of a new home mortgage loan. Some of the fees and costs are related to your mortgage loan application, such as the expense of a credit report on all applicants and rapid rescore fees and costs. Other fees and costs are related to the subject property itself, such as the property home appraisal, pest inspection fees, home inspection fees, well inspection, roof inspection, termite inspection fees, and mold inspection fees.  Closing costs includes third party fees and costs such as title charges, attorneys fees, and recording fees.  Others are payment to the lender for processing your application, such as the loan origination fee.

What Are Closing Costs And How Much Are They?

Unless the home seller offers to pay closing costs by giving you a sellers concession towards the home buyers closing costs for you, these expenses are charged to the buyer and often runs between 2 and 3 percent of the amount being borrowed. In Illinois, the seller can assist up to 6% of the loan amount in paying the closing costs for the buyer on a FHA Loan. Maximum sellers concession allowed on a owner occupant or second home conventional loan is 3% sellers concession.  Maximum closing costs allowed on an investment property conventional loan is 2% sellers concession. The maximum closing costs allowed on a VA Loan is 4% sellers concessions. Closing costs can be paid by the lender for a higher interest rate too through a lenders credit towards closing costs. Because different states have different fees and taxes that are a part of these costs, it’s impossible to generalize nationwide.

Examples Of Closing Costs

Common closing costs can include processing and underwriting fee, mortgage insurance premium, appraisal fee, the cost of a credit report, tax service fee, application, commitment, wire transfer fee, etc. Escrow accounts are often required for many loans for homeowners insurance, real estate taxes, and homeowners associations and require cash deposits at closing.

After your initial meeting with a mortgage professional, you should receive a Good Faith Estimate that includes all the estimated costs to close your loan.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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