Average Closing Costs - What Are They?

Some of these home loan costs you can negotiate. Others are fixed fees.

Then there are those you can shop, like homeowners insurance or home inspections. So be sure and do your homework to get the best price since this affects what you must have as out of pocket money at your closing.

These costs are additional funds you need to have over and above the down payment. Knowledge is power and can save you money.

Home Loan Closing Costs

You can find many of the home loan closing costs itemized on your GFE, or Good Faith Estimate that must, by law, be presented to you by the lender within three days after your application is accepted.

The actual final closing costs may be different from those on the GFE, and thus they might be more. There can be perfectly good reasons for this, but you need to watch out for shady lenders who add in "junk" fees at the actual closing.

Here is a list of some Average Closing Costs

• Application Fee
• Loan Origination Fee or Points
• Mortgage Discount Points
• Appraisal Fee
• Home Inspection Fee
• Property Survey
• Prepaid Interest
• Private Mortgage Insurance
• Homeowner Insurance

Below is an explanation of these average closing costs.

Application Fee

First on the list of the loan closing costs is the application fee. This includes the cost of buying your credit report, which the lender requests in most instances. Average closing costs here are $365.

Loan Origination Fee or Points

Next is the origination fee. This fee pays the person arranging your new loan, the loan officer. Average closing costs vary here, because this fee most often equals one "point", but can be higher. This is usually how your loan officer is paid.

A "point" in mortgage lending equals 1% of the total amount of money you are borrowing (not paying). So, if you need to actually borrow $200,000, one point equals $2,000. As far as average closing costs go on the origination fee, they are about $2,600; but once again, there is a lot of variation depending on down payment, loan amount, and lender policies.

Mortgage Discount Points

You might also have discount points included in your loan closing costs. Points are negotiable (unless, in some situations, you have sub-prime credit) and do not need to be paid other than the origination fee.

So why pay them? Because they lower your loan's interest rate and could save you money over the lifetime of your loan. Average closings costs of discount points: .5% to 2% of the loan amount.

Appraisal Fee

Mortgage closing costs also probably include an appraisal fee. An appraisal is needed to ensure that the property is worth what you and the lender believe it is. Average appraisal fee is $262.

Home Inspection Fee

You may also have to pay an inspection fee, especially if you're buying a home in the country. This inspection is to see that the home is in good condition and is for the lender's legal protection. The average cost here is $400.

Property Survey

A property survey will be needed to confirm a property's location and see about any property improvements. Average closing costs on this: $154.

Prepaid Interest

Prepaid interest costs are also in your mortgage closing costs. Your first payment is not due until six to eight weeks from your settlement date, but your interest on the borrowed amount begins accruing instantly.

The lender calculates how much interest will pile up between closing and first payment date, and has you pay that at closing. Average closing costs here depend on several factors, the two biggest ones being amount borrowed and interest rate.

Private Mortgage Insurance (PMI)

PMI insurance (private mortgage insurance) is a policy that most lenders usually require you to pay for if you borrow more (even .01% more) than 80% of the property's value. This policy covers the lender's losses if you default. By federal law, PMI payments automatically stop when you reach the point where you owe only 80% or less of the property value. The average cost of these policies is $75 per month.

Homeowner Insurance

You will be required by your lender to have homeowner's insurance put in place at settlement. Average closing costs vary once again, but you should figure on the policy costing between $300 and $1000 annually.

Other Home Closing Costs

Now, depending the property's location, the lender, and your situation, there may be several other fees that go into your loan closing costs, too. These range from flood insurance premiums to an escrow account.

Also, if you get a VA, FHA, or RHS mortgage you'll have an additional fee. But you now have an idea of the average closing costs.

These costs can add up. Keep in mind these are just an average of what it may cost you for these closing costs. I am just trying to give you an idea so you will not be surprised when you see them on your Good Faith Estimate.

Are you ready for a mortgage? FHA products are the most flexible. Discover the Best FHA Home Loans to choose from.

If you are a veteran, consider a VA Home Loan as your option. The page explains this awesome product.

Do you still have questions? Have a Question is a cool place to find answers and ask questions. Go ahead....pick my brain!

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