Did you know—Closing Costs
A down payment and monthly mortgage payment aren’t the only costs you’re looking at when buying a new home. Some buyers forget that they will also have to pay closing costs.
What Are Closing Costs?
These costs are the fees associated with “closing”—also known as funding or completing—the mortgage loan on your home. These costs include things like the appraisal fee, home inspection fee, underwriting, recording fee, title search, insurance premiums, credit score report, loan origination, transfer tax, application fee, survey, attorney fees, and any discount points.
What Will My Closing Costs Be?
Homebuyers can typically expect their average closing costs to equal between 1% and 3% of the home’s purchase price. For example, if the home you’re buying costs $300,000, then you can expect to pay between $3,000 and $9,000 in closing costs. Closing costs for an FHA loan are typically between 2% and 6% of your new home’s purchase price.
Your lender will provide a loan estimate that outlines what the closing costs will be (based on the type of loan you’re applying for) within three days of receiving your loan application. They will also issue a closing disclosure that provides the final details surrounding your mortgage loan, including the closing costs, at least three days before your loan closes.
Can I Pay with a Credit Card?
Unfortunately, you can’t pay closing costs with a credit card. What you can do, however, is roll your closing costs into your home loan—if you have an FHA loan. (VA loans are not eligible for this option.) This will mean a slightly higher mortgage payment, but it can be well worth it if you’ve already stretched your budget to come up with the down payment. Naturally, you can also pay your closing costs upfront. This is done either through cash (actually a cashier’s check) or by taking out a private loan.
Does a Mortgage Loan Cover Closing Costs?
As mentioned, closing costs can be rolled into a mortgage loan… as long as you have the type of loan that allows for this and there is enough equity based on the appraised value of the home. This is often used in refinances, but with a purchase it’s a little trickier. Your Loan Advisor can run the numbers for you and give you some options.