Closing costs are also known as settlement fees. These fees need to be paid when real estate is conveyed from the seller to the buyer.
How Much Are Closing Costs On House Purchase
The average closing cost is $3,020. A normal range would fall between 2,700 and 4,000. Another practical estimate is about 3 to 5 percent of the loan amount.
New York is the most expensive state for closing costs, whereas Arkansas is the cheapest. The table below lists the highest and lowest closing costs across the United States.
|Top 5 highest Closing Costs||Top 5 Lowest Closing Costs|
|AVERAGE CLOSING COSTS PER U.S. STATE (2010)|
|California – LA||$4406||New Jersey||$4110|
|California – SF||$4566||New Mexico||$3480|
survey done by Bankrate.com
Included In The Cost
These fees generally consist of 4 different settlement costs, being the lender fees that come with the mortgage loan, the government fees and taxes, 3rd party fees for inspection and certifications, and escrow and interest fees.
A typical ‘close’ faces the following fees:
- Attorney fees
- Title Service Costs
- Recording Fees
- Document or Transaction Stamps or Taxes
- Survey Fee
- Brokerage Commision
- Mortgage Application Fees
- Appriasal Fees
- Inspection Fees
- Home Warranties
- Pre-paid Property Insurance
- Pro-rata Property taxes
- Pro-rata Homeowner Association Dues
- Pro-rata Interest
Consider These Factors
These estimates are based on a $200.000 purchase mortgage for a house in the city by a borrower with 20% down payment and excellent credit rating.
It is difficult for buyers to know exactly which costs are mandatory and which are straight unnecessary. Lenders, brokers and other mortgage parties may try to overcharge a borrower by including a variety of fees in their services. Be warned for this malpractice.
Mortgage lenders are required by the Real Estate Settlement Procedures Act to provide you with a so called ‘good faith estimate’ to give you a better idea of the settlement costs you can expect to face. This GFE needs to be given to you within 3 business days of the submission of your loan application.
Tips Before Closing The Deal
- Many fees and charges are negotioable with the lender, especially administration fees and the like.
- When going over the closing fees, take special interest in fees called ‘administration’, ‘document preparation’, ‘payment processing’, or ‘funding and review’. These kind of fees are kind of arbitrary and the lender might be convinced to lower or completely get rid of these fees when you ask kindly.
- You can save some handsome money by closing near the last day of the month, because escrow services can hold daily interest for every day from closing until the end of the month.
- When the housing market favors the buying party, a buyer could ask the seller to pick up part of the closing costs, or even all of it.
If you want to read more about mortgage settlement costs, visit The US Federal Reserve Board.