What Are The Lender Closing Costs
Posted on December 6, 2021
Have you decided to buy a house but aren’t sure what it’s going to cost you? In this video, I’m going to break down the common lender closing costs when purchasing your home. We’ll look at everything from appraisal fees to insurance so you know exactly what to expect.
Closing On Your Home
Buying a house is exciting, but do you know how much it’s really going to cost you? When you know your closing costs upfront, you can make better and more informed decisions throughout the home buying process. The truth is that the good deals go fast. When you know your numbers, you can take advantage of those good deals without hesitation.
Closing costs are typically going to range between 2% and 5% of the home’s purchase price. For example, if you bought a home for $200,000, your closing costs could range anywhere from $4,000 to $10,000. Closing costs do vary depending on state, loan type, and mortgage lender, so it’s important to pay close attention to all the fees.
Let’s look at some of the most common closing costs you’ll see on your closing statement when buying a home. It’s important to know these figures so you can avoid any surprises.
Appraisal Fee And The Home Inspection
One of the common closing costs you’ll see is an appraisal fee. This expense usually runs from $650 to $800 depending on your state and location. However, the appraisal is so important for you to have. You want to ensure that you’re purchasing a home and that the value is the same or higher than what you’re actually purchasing it for.
The next cost you’ll see is a home inspection fee. While a home inspection is not required, it’s highly recommended. You want to make sure that you’re purchasing a house that is sound structurally, and you also want to know anything and everything that’s wrong with that property. Expect to pay, on average, about $450 to $550 for this expense.
Remember that in most markets, homebuyers only spend about 15 minutes looking at a house on average before deciding to buy it. They haven’t had time to inspect the toilets, the electrical, the A/C unit, and all of the other things that are so important when purchasing a home. The inspection ensures you’re making a wise investment.
Insurance And Underwriting
Another common line item is homeowner’s insurance, which is usually paid one year upfront. This insurance secures and protects the asset in the event of a disaster. The cost of homeowner’s insurance varies, depending on what insurance company that you use and where you’re located. However, $1,200 is a good, solid rough estimate for the average home in East Texas today.
Title insurance is another line item that you’ll see; this is very common and typically costs 1%. This insurance gives the buyers peace of mind and sovereignty, knowing that they’re purchasing a home with no liens. Another line item that you’re going to see is an underwriting fee. It’s not uncommon to have an underwriting fee, as underwriters have to be paid to underwrite a loan.
Most companies do charge underwriting fees. However, some promote the fact that they don’t have underwriting fees. Many times, though, those lenders have higher interest rates.
Processing Fees, Escrow, And Origination Fees
In addition to the underwriting fee, it’s very common to have a processing fee. You have to pay when you’re purchasing a home, and you need to pay these people to make sure they get you to the finish line on time and with efficiency.
Prepaids and escrows are additional fees that can be confusing. If you put 20% down, you’re not required to escrow. However, escrowing your taxes and insurance in this account is very advantageous for many homebuyers. You don’t have to worry about coming up with the money at the end of the year.
One more line item that might be present when buying a home is an origination fee. While it’s not common, this fee is sometimes used to help challenged credit borrowers to purchase a home. Maybe you have a homebuyer that’s wanting to buy down the interest rate, and they think that they’re going to be in the house for a very long time.
That’s when you will see these origination fees. An origination fee is a charge by the lender to the consumer in exchange for a lower interest rate.
Knowing Your Numbers
I hope this helped you understand some of the closing costs and miscellaneous charges you’ll see when purchasing a home. If you have any questions about what fees are or aren’t required, feel free to reach out to me and my team at any time at 903-331-0892. We are here to help make the home buying process easier for you.
Don’t forget to subscribe to my channel so you never miss an episode of my show, all about real estate. You can also check out other videos about purchasing a home in our Learning Center. Stay tuned to see what I feature next!