You’ve found the house, secured financing and are ready to sign on the dotted line. There’s one last step before you are officially a homeowner—the closing day. Closing day is an exciting time, it's the culmination of months of work to purchase a home. On closing day, you will sign several documents and pay somewhere between 2-5% of your purchase cost in closing fees. Here is an explanation to help you understand how these documents and costs break down. The items on the list may or may not be part of your specific purchase situation. The fees charged will depend on your lender, what they bill to you to cover third party costs and what the seller may cover.
Application fee. This covers the cost of processing the loan request and could include the credit check and other administration fees.
Appraisal fee. This is paid to a third-party appraiser to determine the property value. A professional appraiser will come out to the home and evaluate its market value. This generally costs between $300-$500.
Attorney fee. This is paid to the attorney to review all the financial documents prepared. Not all states require an attorney.
Origination fee. Lenders charge this to process your loan paperwork and is typically about 1% of the loan amount.
Credit report fee. Lenders may charge the borrower for pulling your credit report.
Home inspection. A professional inspector will come to the home and is tasked with uncovering any problems such as a leaky roof, mold or other structural issues.
Points. If your interest rate was locked with points, you will have to pay that amount at closing. One point is equal to 1% of the loan.
Property insurance. This is paid to insure the property. The insurance amount depends on your provider and the size of the home. Insurance costs could be added to escrow and collected each month as part of the monthly mortgage payment.
Property taxes. The tax amount would be prorated for the year. Like property insurance, this could also be included in the monthly mortgage payment.
Title search. This fee covers the search for any liens on the property and to insure the person selling is indeed the owner.
VA Funding Fee. If this is a VA loan, you may need to pay the VA funding fee or you can roll the fee into your loan. This fee is used to support the government VA loan program. Learn more about the VA funding fee.
After going over the fees and looking through the documents, take time to ensure all information is accurate. Check the loan amount, interest rate, term and monthly payment. After all is complete and keys have changed hands, you can breathe a sigh of relief as you will officially be a homeowner.
Would you like to ask one of our Loan Advisors about closing costs? Please visit our Get Started page or call 877-220-5533.