Yale Roth M.A., M.Ed

First Time Home Buyer? How Much Are Your Mortgage Closing Costs Going To Be?

This is a really important mortgage question that as a first time home buyer you need to pay attention to.  “Can You Afford Your Closing Costs?” and “How Much Do You Really Have To Pay In Closing Costs?”

First of all, your closing costs when buying residential real estate are broken down into 4 separate parts.

Here are the closing costs:

1. Lender fees. (including any discount points you may pay to get a lower mortgage rate.)

2. Title charges.  This includes title searches and title insurance

3. Appraisal.  This is completed by a third party appraiser, not an employee of the bank or mortgage company.

4. Government recording fees and taxes.  The county the property is located in will charge you to record the mortgage.  In addition, depending on the state the property is located in, you may need to pay an additional tax on the loan amount your borrowing.

So what do all these costs add up to?

Good question.

I’ll start with the items 2, 3 and 4. first.

The title charges will vary but you want to contact a local title company and ask them what their title charges are.

Tell them you are buying a new home.  They will ask you your purchase price and loan amount.  With that information, they will give you a breakdown of the total amount of the title fees.

The appraisal fee will vary depending on the value and size of the home.  The appraisal fees range from $300 to $450 and may be higher for a larger home.

To calculate the government recording fees, you can ask the title company if the state charges any documentary taxes or mortgage tax and how much that is estimated to be.  Have them estimate a government recording fee.

And finally the lender fees.  The lender fees can vary according to whether you’re selecting a lower mortgage rate and paying discount points to get the mortgage rate lower.

Alternatively, you can select a higher mortgage rate with a lender credit.  The lender credit is applied to the title and government recording fees, minimizing or even eliminating your closing costs.  Nice!

So the costs to buy the home can vary according to the mortgage rate you select.

Also, please note: if you’re setting up a tax and insurance escrow account so the lender will pay your property taxes and dwelling insurance for you, you’ll need to bring cash to fund at least 2 months of property taxes and 2 months of insurance escrows.

In addition, you’ll need to pay for your dwelling insurance 1 year paid premium prior to or at closing.

This could amount to good sum of money, so be prepared!

To summarize  first time home buyers, your closing costs when buying a home can vary according to the mortgage rate you select.  The title charges, appraisal and government recording fees and taxes will not change.

However, the lender fees can change depending on the mortgage rate you lock in.

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