Question:

Can you tell me how to estimate average home mortgage closing cost fees?

Answer:

Closing costs vary from lender to lender and it is hard to give a specific number to average closing costs. However, you can figure in the factors that affect closing costs and then you can get an estimate for a specific lender.

Factors Affecting Home Mortgage Closing Costs

Home mortgage closing costs depend on the following factors:

Down Payment:

Depending on how much you want to pay at the beginning of your mortgage, that will determine how much your closing costs are going to be. Usually homeowners make a down payment of 5%-20% of the total mortgage.

Buy down Payment:

If you are getting a buy down type of mortgage, then you'll have to pay a certain amount in order to "buy" some "interest points" that you can knock off your interest rate.

Lender Fees:

This includes all the fees the lender charges you for processing the loan. Lender fees may include a loan locking fee, a commitment fee to open a line of credit, a loan origination fee and other miscellaneous administrative fees.

Insurance Fees:

This is the first year's insurance premium charged by the insurance companies for your home. Regular insurance does not cover extreme cases like natural disasters and if you live in an area that is in danger of natural disaster (e.g. a federally designated flood zone) etc; for insurance you'd have to pay extra.

Legal Fees:

This is the fee paid to law firms and attorneys for drawing up and reviewing the legal paper work that is required for you to get ownership of a property.

Servicing Fee:

When you get a mortgage your insurance and tax payments are handled by your mortgage servicing company. For this service they charge you servicing fee at the beginning of the loan.

Appraisal Fee:

As per law, before a mortgage transaction, an appraisal of a house is required in order to determine its market value and ensuring that the loan does not exceed the property value. The cost of this appraisal is borne by the lender.

Credit Report Fee:

To evaluate credit worthiness, lenders pull the credit history of the loan applicants. This costs them a fee, which they pass on to the borrower at closing.

Miscellaneous Fees:

These include small charges like courier, documentation, wire transfer fees etc.

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