Closing costs

Closing costs

What are closing costs?

Closing costs are fees you pay to the lender when you finalize your loan. This is usually 3% to 5% of the total loan value and is paid for by the borrower. This fee is usually a condition for the loan finalizing and cannot be spread out over the course of the loan. This amount is usually in addition to the down payments.

What is included in the closing costs?

Some of the items included in the closing costs include:

  • Loan origination fees. The fee the originator makes for underwriting and processing the loan.
  • Appraisal costs. The fee third party appraisers make for determining the property value.
  • Points and Credits. If you've decided to buy any points to reduce your monthly payment, it's payable at closing.
  • Private Mortgage Insurance. You typically need to pay, at least, the first year of the insurance you're required to buy.
  • Attorney fees. Fees payable to the attorney for the close of the purchase should be paid at this time.
  • Prepaid interest. Any interest that's accrued during the loan process would need to be paid here.

The down payment is typically not part of the closing costs but is paid at around the same time.

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