If you’ve ever gone through the mortgage process, you know about closing costs. Most likely you were given a list of costs associated with the mortgage and told to either bring the money to closing or roll the costs into your mortgage.
As an informed mortgage customer, you should make your mortgage banker walk you through each cost, and explain in detail what you are paying. The bottom line is that you don’t want to be surprised at the last moment. Imagine getting a call from your mortgage banker the day of your closing with a message that your closing costs are $1,200 more than you thought. And the only explanation is that the title company made a mistake. Chances are you may have to reschedule your closing to get the money together for the difference, or have your mortgage adjusted to have the amount rolled in.
To avoid a situation like this, it’s a good idea to know exactly what the costs and fees are, how they are calculated, and why you (or the seller) have to pay them. Here’s a breakdown of the most common closing costs and fees with a rough estimate of average cost:
- Appraisal (up to $450) – This is paid to the appraisal company to confirm the fair market value of the home.
- Credit Report (up to $30) – A Tri-merge credit report is pulled to get your credit history and score. You cannot supply your consumer pulled report and the scores pulled form the internet from any place other than myfico.com are not real scores nor are they accurate.
- Closing Fee or Escrow Fee (generally calculated a $2.00 per thousand of purchase price plus $250) – This is paid to the title company, escrow company or attorney for conducting the closing. The title company or escrow oversees the closing as an independent party in your home purchase. Some states require a real estate attorney be present at every closing
- Title Company Title Search or Exam Fee (varies greatly) – This fee is paid to the title company for doing a thorough search of the property’s records. The title company researches the deed to your new home, ensuring that no one else has a claim to the property.
- Survey Fee (up to $400) – This fee goes to a survey company to verify all property lines and things like shared fences on the property. This is not required in all states