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2024's Average Closing Costs: A Comprehensive List



How much are closing costs? 

Closing costs generally range between 2-5% of the loan amount, often lesser for larger loans.

While some closing costs remain fixed, lenders often have flexibility in their fees, allowing borrowers to seek the best rates and lowest closing costs.

Finding a lender willing to cover or roll these costs into the loan during refinancing can potentially eliminate out-of-pocket expenses.

What are closing costs? 

Closing costs represent an array of fees necessary to finalize a new mortgage, typically amounting to 2-5% of the loan value, applicable to both home purchase and refinance loans.

For instance, on a $100,000 mortgage, closing costs might tally $5,000 (5%). Conversely, on a $500,000 mortgage, it's closer to $10,000 (2%).

Notably, closing costs for a refinance loan are often a smaller percentage as certain fees, like transfer taxes and owners title insurance, aren’t included.

These expenses encompass charges from your lender, home appraiser, title company, and other parties involved in the mortgage process. On the closing day, borrowers pay these fees to an independent escrow company, simplifying the process.

It’s essential to distinguish closing costs from the down payment, although some lenders may consolidate them in the closing documents.

The positive news is that several closing costs are negotiable. By comparing offers from various lenders, borrowers can identify the most cost-effective option and potentially negotiate for reduced fees.

What is included in closing costs? 

Closing costs encompass almost all initial fees for buying or refinancing a home, excluding the down payment. Before delving in, ensure to review both your interest rate and these associated costs. The comprehensive list of closing fees, detailed in the Loan Estimate from any lender, includes several significant expenses:

  1. Loan origination fee or broker fee (0-1% of loan amount): This charge, which varies from lender to lender, essentially covers the administrative costs associated with processing a loan. It can encompass various aspects like application processing, document preparation, and administrative expenses. Borrowers often have room to negotiate this fee to lower their overall closing costs.

  2. Mortgage points or discount points (0-1% of loan amount): These points, available for purchase during the loan origination, represent a way to potentially reduce the interest rate over the loan term. Each point typically costs 1% of the total loan amount and can lower the interest rate by a quarter of a percent. However, this tactic depends on the borrower's financial strategy and the period they plan to stay in the home.

  3. Processing or underwriting fee ($300-$900 each): This cost accounts for the lender's efforts in assessing and approving the loan application. It involves evaluating the borrower's financial situation, credit history, and the property being financed. The fee can fluctuate based on the complexity of the loan and the extent of required documentation.

  4. Title search fee and title insurance ($300-$2,500+): These expenses are crucial for confirming the property's legal ownership and ensuring there are no outstanding liens or issues with the title. Title insurance protects against potential ownership disputes and offers peace of mind regarding the property's legal status.

  5. Escrow fee ($350-$1,000+): This charge is directed toward the escrow company responsible for managing the funds and the transfer of property during the closing process. The fee covers the administrative tasks related to managing the financial aspects of the home sale, ensuring a smooth transition of ownership.

  6. Home appraisal fee ($500-$1,000+): This fee supports the evaluation of the property's value, essential for determining the fair market price or value in a refinance scenario. An appraisal confirms that the property's worth aligns with the loan amount, offering assurance to the lender and borrower.

  7. Home inspection fee ($300-$500): An integral part of the home buying process, this fee covers the inspection conducted by a certified home inspector. The inspection aims to assess the property's structural integrity, identify potential issues, and ensure the property meets safety and quality standards.

  8. Prepaid taxes and insurance ($1,000-$4,500+): Typically includes advance payments for property taxes and homeowners insurance.

  9. Real estate commissions (5%-6%): Mainly covered by the seller and directed towards the buyer's agent during a new home purchase.

  10. Real estate attorney fee: In some states, a real estate attorney's fee is required for reviewing home purchase agreements.

  11. Homeowners association transfer fee: Applicable to HOA-managed homes, covering the transfer of HOA fees from seller to buyer. While sellers usually pay these, sometimes buyers do.

Government-backed mortgages entail specific upfront charges:

  • FHA loan: Carries an upfront mortgage insurance premium of 1.75% of the loan amount.

  • VA loan: Imposes a VA funding fee, ranging from 1.4% to 3.6% of the loan amount.

  • USDA loan: Entails an upfront mortgage insurance fee, typically 1% of the loan amount.

These premiums contribute to your closing costs on an FHA, VA, or USDA loan. However, borrowers can incorporate them into the loan balance, bypassing extra upfront charges.

Conventional loans with less than a 20% down payment necessitate private mortgage insurance (PMI), entailing only a monthly premium rather than an initial upfront charge. It’s wise to compare offers from multiple lenders to understand the variability of closing costs for your specific loan. Understanding and managing these expenses effectively can significantly impact the total cost of homeownership.

What are average closing costs in 2024?

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