Closing Costs

Closing Costs

Understanding the Costs of Getting a Mortgage

When you purchase or refinance a home, there are costs associated with obtaining the mortgage and completing the transaction. These are commonly referred to as closing costs.

Closing costs vary depending on the loan program, property, purchase price or loan amount, lender, insurance, taxes, title services, and other factors.

Closing Costs vs. Cash to Close

These two terms are often confused, but they aren't the same thing.

Closing Costs
The fees and expenses associated with obtaining the mortgage and completing the transaction.

Cash to Close
The total amount you may need to bring to closing after accounting for items such as:

• Down payment

• Closing costs

• Prepaid expenses

• Initial escrow deposits

• Earnest money or other deposits already paid

• Seller or lender credits, when applicable

• Other transaction adjustments

Your Loan Estimate

After you apply for a mortgage, you'll generally receive a Loan Estimate for applicable transactions. It provides important information about the proposed loan, including the estimated payment, interest rate, closing costs, and estimated cash needed to close.

We'll review it together so you understand where the numbers come from and what you're paying for.

What’s Included in Closing Costs?

Closing costs can include several different categories of expenses. The exact charges will depend on your loan and transaction.

Lender & Loan-Related Costs
These may include items such as:

• Origination or lender fees

• Credit report

• Processing or underwriting charges, when applicable

• Discount points, if chosen

• Other loan-specific charges

Appraisal & Property-Related Costs
Depending on the loan and property, these may include:

• Appraisal

• Flood determination

• Property inspections or certifications required by the loan program

• Condominium or association-related documentation, when applicable

Title & Settlement Costs
These can include:

• Title search

• Title insurance

• Settlement or closing services

• Recording and related charges

Government Fees & Taxes
Depending on the transaction and location, there may be:

• Recording fees

• Transfer or documentary taxes

• Other applicable government charges

Some Costs Aren’t Really “Fees”

Your amount due at closing can also include prepaid expenses and initial escrow deposits. These aren't necessarily fees charged for obtaining the mortgage.

Examples include:

• Prepaid interest

• Homeowners insurance premiums

• Flood insurance, when required

• Property tax escrows

• Homeowners insurance escrows

• Mortgage insurance or applicable program charges

These amounts can make the total cash to close higher than the loan fees alone.

Ways Closing Costs May Be Reduced or Paid

Depending on the loan program and transaction, there may be several ways to help manage the amount of cash needed at closing.

Seller Credits
In a purchase transaction, the seller may agree to contribute toward certain allowable closing costs, subject to the loan program’s limits and requirements.

Lender Credits
In some situations, a lender credit may be available to offset certain closing costs. This generally involves accepting a different interest rate, so we’ll compare the overall cost and payment before deciding whether it makes sense.

Gift Funds
Eligible gift funds from an acceptable source may be used toward certain down-payment or closing requirements, depending on the loan program.

Down Payment Assistance
Qualified homebuyers may have access to programs that can help with down payment and/or eligible closing costs.

Negotiating the Purchase Contract
How the purchase contract is structured can affect the buyer’s cash needed at closing. It’s helpful to discuss financing and potential seller contributions before the offer is written.

Look at the Complete Financing Package

The loan with the lowest advertised rate isn't necessarily the loan with the lowest overall cost.

We'll compare the:

• Interest rate

• Monthly payment

• Closing costs

• Discount points or lender credits

• Cash needed to close

• Loan term

• How long you expect to keep the loan or home

The goal is to find the financing structure that makes sense for your situation—not simply the lowest rate on paper.

Final Numbers & the Closing Disclosure

Before closing on most consumer mortgage transactions, you'll receive a Closing Disclosure showing the final loan terms and closing information.

The Closing Disclosure allows you to review items such as:

• Loan amount

• Interest rate

• Monthly principal and interest

• Estimated taxes, insurance, and other payment components

• Closing costs

• Credits and adjustments

• Amount needed to close

Compare Your Final Numbers

We'll review the final figures and compare them with the earlier estimates so you understand any changes before closing.

If something doesn't look right or you don't understand a charge, ask before you sign.

Questions About Your Closing Costs?

Every transaction is different. If you're purchasing or refinancing, I can help you estimate the costs and understand how they affect your overall financing.

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Closing costs, prepaid expenses, escrow requirements, credits, and cash needed to close vary based on the loan program, property, transaction, lender, insurance, taxes, and other factors. Estimates are subject to change until final loan and closing figures are established.