What to Expect at Your Mortgage Closing
Buying a home is an exciting journey! It can also be stressful at times, with so many steps involved in the process. There are so many details and decisions to consider, not to mention the costs. As you’re getting ready to buy a home and planning out your home buying budget, it’s important to make sure you factor in all costs involved in buying a home. This includes closing costs, which cover a number of fees and charges associated with officially transferring a property from one owner to another. It’s a complex process which requires involvement from a number of professionals, all of whom need to be paid. Closing costs cover the fees for these professionals, along with taxes and other expenses.
How Much Will My Closing Costs Be?
Closing costs are calculated as a percentage of the home’s purchases price, so your closing costs will depend on the price of your home. The higher the home price, the higher closing costs will be, and vice versa. Closing costs are typically between 2-5% of the home price. The final amount will depend on local laws and taxes, various factors involving your home and property, and the service fees of the real estate agents, lawyers, and other professionals used in the home purchase process. You can plan ahead and calculate an estimate of your closing costs to give you an idea of how much to budget for. But your closing costs won’t come as a shock on your closing day. Your lender is required by law to provide a detailed list of your estimated closing costs within three days of your mortgage application.
What Do Closing Costs Cover?
Here is a list of some of the costs and fees that may be included in your closing costs:
- Application fee – Covers all administrative work needed to process your mortgage application
- Appraisal fee – Covers a professional appraiser who provides your lender the estimate of your home’s value
- Attorney fee – In Georgia, closing documents must be reviewed by an attorney before they become binding
- Credit check charge – Some lenders charge a fee to check your credit report
- Discount points – Optional charges that can help you qualify for a lower interest rate on your loan
- Escrow deposit and/or Escrow fee – You may be asked to make your initial escrow deposit at closing, which will cover the first two months of property taxes and mortgage insurance payments
- Home inspection – Covers the cost of a professional inspection of your home and property
- Homeowner’s insurance – Lenders require buyers to purchase insurance on their home, and some lenders require you to pay the first year of homeowners’ insurance premiums at closing.
- Lender’s title insurance – This assures the lender that you own the home and the mortgage is valid; it protects the lender if there is a problem with the title
- Origination fee – The borrower pays this fee to the lender for the process of making the loan, which includes application processing, underwriting, and other services the lender provides
- Pest inspection – Some states require an inspection for termites and/or other pests. Although this inspection is not required by the State of Georgia, it may still be required for certain mortgage loan types.
- PMI (Primary Mortgage Insurance) – If your down payment is less than 20% of the home’s total value, you’ll likely need to pay PMI until you own 20% of the home according to market value. The first month’s premium will be due at closing.
- Prepaid interest – Most lenders require buyer’s to prepay the interest that will accrue from the day of closing until the date of the first mortgage payment
- Survey fee – Covers of the cost of getting the land survey for the property
- Title search and insurance fee – The title search fee covers the cost of the lender hiring a title company to search for possible legal claims on the property you’re searching. This also includes the lender’s title insurance policy premium and other related costs.
- Transfer tax – In Georgia, the seller typically pays the transfer tax, which covers the transfer of the property’s title from the seller to the buyer
- Underwriting fee – Covers the cost of researching whether you should be approved for the loan
Are There Mortgage Loans With No Closing Costs?
It may sound ideal to have a mortgage loan with no closing costs. However, there is no such thing as a mortgage without closing costs. Even with proclaimed “no-closing-costs” mortgage loan, the costs still exist even though you won’t see the costs and won’t need to pay them upfront. With a no-closing-costs mortgage, the closing costs are simply rolled into the mortgage loan, effectively increasing the price of your home. Plus, you’ll be paying interest on your closing costs throughout the life of the loan. Lenders may also tack on higher interest rates for no-closing-costs mortgages. This means that you’ll wind up paying more over the life of the loan than you would with other mortgage types. Attempting to skirt closing costs might seem like a good idea upfront, but you’ll be paying the financial repercussions for years to come.
How Can I Save On Closing Costs?
Though you aren’t able to avoid paying closing costs, there are a few steps you can take to help reduce the overall dollar amount of your closing costs.
- Schedule your closing date at the end of the month. Closing costs include prepaid interest charges on your mortgage for the remaining days of the calendar month. If you schedule your closing for the end of the month, you’ll only be paying these charges for the last few days of the month.
- Ask the seller to cover some of the closing costs. If the seller is eager to finalize the sale, they will likely be willing to split closing costs.
- Compare your loan estimate and your final closing disclosure. Make sure there aren’t any new charges or inconsistencies. If something doesn’t look right, address it with your lender.
If you’re ready to apply for a mortgage loan, let our team help you get the loan you need. Visit our Mortgage Loan Center to learn more about the mortgage process, use our Home Buying Calculators to get a picture of what your home loan will look like, and check out our Buying a Home video series on YouTube for more information about home buying. Apply for a mortgage loan online or set up an appointment to speak with one of our Mortgage Loan Officers.
At Robins Financial Credit Union, our mission is to enhance the financial well-being of our members and community. We honor this commitment by providing educational content to help you make the most of your finances. Read our other blog articles to help you gain the financial knowledge you need to succeed.