For those looking into a mortgage loan, there are several fees or costs that are generally paid near the end of the process, from the down payment to multiple others. Rather than separate these individually, they are commonly grouped together and known collectively as “closing costs.”
At VIP Mortgage, we’ll assist you with everything from finding the best mortgage rates to ensuring you’re prepared for closing costs well in advance. What are some of the common items that may be included in your closing costs? Let’s go over that plus some general preparation tips to be aware of.
Common Closing Costs
Generally speaking, we recommend budgeting between two and four percent of the total purchase price of the home for closing costs (excluding the down payment, which we’ll get to in a moment). Some of the regular costs that will generally be included here:
- Home inspection: A vital process during any home purchase is a home inspection from a third-party inspector, who will provide a full report on the state of the home both inside and out. If there’s damage, pest concerns, rot or other problems, you can either demand they be repaired by the seller or reconsider your purchase. These inspections do come with a fee, however.
- Lender fees: You will also have to pay basic lender fees for appraisals, paperwork and administration fees. In many cases, though, these will be folded into the mortgage itself.
- Attorney fees: If you hire an attorney to help you close the deal, you will have to pay their hourly rate.
- Title fees: One of the largest closing costs out there is the title fee, which includes title insurance, the title search and other service fees from the lender. This will often make up over half of the total closing cost amount.
- Prepaid costs: In many cases, the opening of an escrow account is required to complete a mortgage. This may also include paying prepaid costs like property taxes or homeowners’ insurance.
- Down payment: Finally, there’s the down payment, which some people consider separate from closing costs, but will be paid around the same time. Many new homeowners are required to make a down payment of at least 10 percent of the total purchase price, though there are several programs that may lower this requirement.
Preparing for Closing Costs
As soon as you decide to move forward with a mortgage and home search, speak to one of our lenders. We’ll give you a detailed idea of the money you’re qualified to borrow based on your finances, plus an estimate of the closing costs you’re likely to run into based on your situation. We’ll also help you do some early shopping around for homeowners’ insurance, an escrow company, home inspectors and other parts of the process.
For more on closing costs, or to learn about any of our other mortgage loan services, speak to the staff at VIP Mortgage today.