Mortgage Closing Costs

When you close or finalize a mortgage there are many fees, taxes and insurance costs that you will need to pay. These are called closing costs.

The amount of money you will need to pay in closing costs will very. It depends on several factors. Taxes change depending on your location. Realtors, attorneys and banks can all charge different fees. But in general closeting costs run between 3% to 6% of the total mortgage amount. That means if you are taking out a mortgage for $100,000 then your closing costs will be around $3,000 to $6,000. By law (The Real Estate Settlement Procedures Act) lenders are required to give you an estimate of the closing costs within three days of receiving your application

There are many fees that comprise closing costs. And you should look over all of the closing costs carefully. Remember that nothing is set in stone. You should always try to convince or negotiate with the lender to pay a fee or just drop it entirely. You could also negotiate with the seller to see if they will pay some of the closing costs.

Closing costs for a mortgage fall into three main categories, the cost of the loan, fees for transferring ownership and taxes.

The following is a list of mortgage closing costs:

Processing fee This is a fee that the bank charges for processing the mortgage. This fee usually includes application and credit check fees. Remember these fees are not the same with each lender. You should always shop around. In general the processing fee is between $400 and $500.

Appraisal fee This is the fee the appraiser. The appraiser is an independent agent who gives an opinion on the value of the house. This opinion is used to confirm the value of the house. This fee is usually around $300

Origination fee This is a fee that a lender may charge on top of an application or processing fee. The origination fee is to pay for additional work involved in preparing your mortgage. It is not always part of the closing costs so make sure you ask your lender about this fee.

Discount points A discount point is either paid when your mortgage is approved or when you close on the mortgage. Discount points can save you a lot in interest payments. For more information on discount points visit our section on points.

Document preparation fee This is a fee for preparing all of the documents required for the closing. This fee can be a flat rate or on occasion a percentage of the loan (usually less then 1% of the mortgage). This fee can also be a part of the attorney or the application fee.

Attorney fees The fees for both the lenders and borrowers lawyers. This includes the cost for the creation of documents and to make sure that every thing has been done right. The closing attorney will collect all fees; pay any taxes and outstanding bills, pay the closing fees and make sure that the seller receives there money. Attorney fees can range from $500 to exceeding $1500.