Mortgage Closing Costs: How Much You'll Pay

What Are Closing Costs?

Acquiring a mortgage isn't a free service. Besides paying an interest rate for getting a mortgage, the buyer must also cover some other costs. These are total closing costs for buying a house.

But what are closing costs for buyer exactly? These are the costs a buyer must pay to get loan documents that transfer homeownership from a house seller to the buyer. Third parties are always involved in the process of purchasing a new home. 

For instance, the mortgage lender and the real estate attorney are typically involved in the process, and the buyer must pay for their services. Moreover, closing costs also consist of fees these professionals charge for the services of finalizing the real estate transaction. 

Before this article reveals how much closing cost for buyer to pay, check these key facts:

• The buyer and the seller may both be subject to covering closing costs.

• The buyer and seller must discuss closing costs before making a real estate deal.

• In some cases, closing costs consist of fees related to the underwriting of a mortgage loan and the origination, insurance premiums, real estate commissions, etc.

Moreover, typical closing costs for buyers are also affected by the state you live in. Check out the table further in the article to learn more. 

Typical Closing Costs

Usually, average mortgage closing costs are about 3% to 6% of the home's overall cost. Suppose one plan on buying a home that costs $300,000. In that case, the lowest closing costs would be around $9,000, and the highest would be $18,000. So, the average costs, in this case, are $13,500.

A lander must always calculate the loan estimate within three business days. So, the buyer learns about the entire house price, including mortgage lender fees. The document should also outline the estimated closing costs and additional loan info. However, the closing costs may fluctuate by the actual closing date, and the price won't surprise the buyer. 

Another thing to remember is that the lender must also provide you with a closing disclosure form within three business days. The document should have a column with estimated closing costs, final closing costs, and the difference between these two columns. 

This document should help you if the costs are significantly higher than they were initially. If this difference is too significant, clarify the reason with the lender or real estate agent. 

How Much Does A Buyer Will Pay in Closing Costs?

So, how much are closing costs? As mentioned, the price depends on such factors as the state of buying a home, the price of the home, and loan type. Even the lender a buyer uses affects the price.

If a buyer is lucky, the costs may be as low as 1% or 2% of the purchase price. However, if the buyer is using the services of loan brokers and real estate agents, the costs may go up to 15% of the property's price. 

The buyer's portion of the costs usually includes the following:

• One or two origination points. It's the lender's fee that is equal to 1% to 2% of the loan amount. The origination point typically includes loan origination fees of $750 to $1,200. 

• Loan underwriting fees. The fee is usually $1,000 or slightly higher. The loan underwriting fee includes inspection, appraisal, survey, and title work services fees.

• One or more discount points. If buyers choose to prepay interest, they may get a mortgage discount. This discount should be included when calculating closing costs.

• An initial mortgage insurance premium. The premium typically doesn't go over 2% of the loan amount. The insurance premium is included when the buyer decides to use insurance or a government. 

In the purchase agreement, in the disclosure section, buyers and sellers find an outline of which costs are the responsibility of buyers and sellers. As for the mortgage, you will find closing costs in the loan estimate and the closing disclosure. 

What Is Average Closing Cost For Buyer?

As you see, the average closing costs for buyer are different in all states. The survey was conducted a few years ago, and its results showed that the highest prices are in parts of the Northeast of the U.S. Take a look at the table below to better understand the average costs. Note: the table includes only the highest and lowest average costs by state. 

As you see, the costs vary significantly. Buyers should consider the state of where they want to buy their real estate given this data.