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Mortgage Closing Cost Example

Mortgage Closing Cost Example

    The example in the table below shows potential estimated closing costs and the total amount of money required at closing, including the down payment, when you buy a home.  The example illustrates the two types of mortgage closing costs:

    • Non-recurring closing costs: These are one-time, up-front costs that the borrower pays to various third parties to process and close the mortgage. Examples include lender, appraisal, title company, settlement agent / escrow and attorney (if applicable) fees.  You pay these items when your loan closes and then you do not pay them again.
    • Recurring closing costs: These are costs that the borrower will continue to pay after the mortgage closes such as interest (from the day your mortgage closes until the end of the month in which your mortgage closes), homeowners insurance, pro-rated property taxes and homeowners association fees (if applicable).  Recurring closing costs are usually annual costs that you pay a portion of at closing and then you continue to pay these fees on an ongoing basis after your mortgage closes.  For example, you continue to pay property tax and homeowners insurance as long as you own your home.

    We use the following assumptions for the closing cost example:

  • Key Assumptions
    Home Purchase Price $475,000 Down Payment 20% / $95,000
    Mortgage Amount $380,000 Interest Rate 4.250%
    Lender Fee Flat / $995 Homeowners Association Fee (HOA)? No
    Loan Type Conventional Mortgage Closing Date March 15th
  • The key points to highlight in this example are that the borrower makes a down payment of 20% so he or she does not have to pay private mortgage insurance (PMI) and because this example shows a conventional loan, the borrower does not have to pay an FHA mortgage insurance premium (MIP), VA funding fee or other upfront fee associated with government-backed mortgage programs. Additionally, the borrower is paying a flat lender fee of $995 as opposed to paying origination points or multiple lender fees to process and close the mortgage.  The borrower does not pay discount points to lower the mortgage rate.

    The borrower uses an escrow company as opposed to a real estate attorney.  Escrow companies are typically used in the western U.S. while real estate attorneys are typically used in the eastern U.S.  Because the mortgage closes on March 15th, the borrower is required to pay interest expense from March 15th through the end of the month (16 days) and property tax from March 15th through June 30th.  You are required to pay prepaid interest at closing from the date your loan closes until the end of the month in which it closes.  You are also required to pre-pay prorated property tax from the date your loan closes until the date your property tax is due.

    The example below shows non-recurring closing costs separate from recurring closing costs and also includes the down payment required to purchase the property.  The example does not show that the borrower holds savings in reserve at the time of mortgage closing but this is always a good idea.  As illustrated by the example, your are usually required to pay thousands of dollars upfront at closing including both closing costs and your down payment.  Borrowers should be aware of mortgage closing costs before they start the home purchase process so they are not surprised by the amount of funds required to close their loan.

    This example shows estimated closing costs for this specific example and is provided for informational purposes only.  Your actual closing costs depend on many factors including location property value, mortgage amount, loan program and lender.  Closing costs are typically higher for larger mortgage amounts and higher-priced homes.  Additionally, the costs for certain loan programs are higher, especially if they require additional documentation or effort on the part of the lender.  Where your property is located is another important factor as higher property tax rates increase your recurring closing costs.  Finally, loans that close earlier in the month and year also usually have higher recurring costs due to higher partial interest expense and pro-rated property taxes. Review the example below and then be check with your lender to determine the closing costs based on your specific situation.

  • Closing Costs Example
    Non-Recurring Closing Costs
    Item Approximate Cost
    Lender Fees
    • $995
    Wire Transfer Fee
    • $75
    Appraisal Fee
    • $525
    Title Services Fees
    • $650
    Escrow Fee
    • $1,350
    Credit Report Fee
    • $25
    Flood Certification Fee
    • $20
    Government Recording Charge
    • $150
    Notary Fee
    • $150
    Tax Service Fee
    • $80
    Home Inspection Fee (optional)
    • $450
    Termite Inspection Fee (optional)
    • $50
    Total Non-Recurring Closing Costs
    • $4,520
    Recurring Closing Costs
    Item Approximate Cost
    Interest (mortgage closes 3/15; $44.86 per day for 16 days)
    • $718
    Property Tax (property tax for 3/15 - 6/30)
    • $1,593
    Homeowner's Insurance (Hazard Insurance)
    • $475
    Total Recurring Closing Costs
    • $2,786
    Total Closing Costs
    • $7,231
    Down Payment
    • $95,000
    Total Amount Required at Mortgage Closing
    • $102,306
  • The table below shows mortgage rates and closing costs for leading lenders in your area.  We recommend that you contact multiple lenders in the table and compare loan proposals.  Shopping for your mortgage and comparing lenders enables you to find the best mortgage terms including the lowest closing costs.

  • Rate Details*
    Loan Program:  
    Monthly Payment:  
    APR:  
    Rate:  
    Points  More Info:
    Points: Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
     
    Total Lender Fees:  
    Loan type:  
    Property Value:  
    Loan to Value:  
    Credit Rating:  
    Date Submitted:  
    Monthly Housing Payments
    P & I More Info
    Principal & Interest: A periodic payment, usually paid monthly, that includes the interest charges for the period plus an amount applied to the reduction of the principal balance.
    Mortgage Insurance More Info
    Mortgage Insurance: The monthly cost for a policy that protects the lender in case you’re unable to repay the full amount of the loan. It is typically required for loans that have a loan-to-value ratio between 80% to 100%.
    (Estimated)
    Property Tax More Info
    Property Tax: (Also called "Real Estate Tax.") Property taxes are government assessments on real estate property. With mortgage financing, the local, county or state tax assessment on real estate property is considered part of the monthly housing obligation and typically collected and set aside by the lender ...
    (Estimated)
    Homeowner Insurance More Info
    Homeowner Insurance: or also commonly called hazard insurance, is the type of property insurance that covers private homes. It is an insurance policy that combines various personal insurance protections, which can include losses occurring to one’s home, its contents, loss of its use, or loss of other personal possessions of the homeowner, as well as liability insurance for accidents that may happen at the home or at the hands of the homeowner within the policy territory.lender ...
    (Estimated)
    Homeowner Association Fee More Info
    Homeowner Association fee: (HOA) fees are funds that are collected from homeowners in a condominium complex to obtain the income needed to pay (typically) for master insurance, exterior and interior (as appropriate) maintenance, landscaping, water, sewer, and garbage costs.
    (If Any)
    Total Monthly Housing Payments
    Lender Fees
    Points More Info
    Points Fees you are willing to pay in order to get a lower interest rate. The number of points refers to the percentage of the loan amount that you would pay. For example, "2 points" means a charge of 2% of the loan amount.
    Origination Fee More Info
    Origination Charge: A loan origination charge is a fee charged by the lender for evaluating, processing, and closing the loan.
    Credit Report Fee More Info
    Credit Report Fee: Fee charged to obtain an applicant’s credit history prepared by one or all of the three major credit bureaus. Used by lender to determine the borrower’s creditworthiness.
    Tax Service Fee More Info
    Tax Service Fee: A fee charged by the lender to cover the cost of retaining a tax service agency. These agencies monitor the property tax payments on the property and report the results to the lender.
    Processing Fee More Info
    Processing Fee: A processing fee is a charge by the lender for clerical items associated with the loan. Examples of processing include loan set up, organization of loan conditions for underwriting, and preparing required disclosures for the borrower.
    Underwriting Fee More Info
    Underwriting Fee: A fee charged by the lender to verify information on the loan application, authenticate the property’s value, and perform a risk analysis on the overall loan package.
    Wire Transfer Fee More Info
    Wire Transfer Fee: In most cases lenders wire funds to escrow companies to fund a loan. Commercial banks that perform this function will charge the lender so the fee is generally passed on to the borrower.
    (If Any)
    FHA Upfront Premium More Info
    FHA Upfront Premium: A fee paid in cash at the close of escrow or more commonly it is financed into the loan. These premiums are pooled together by the FHA and are used to insure the risk of borrower default on FHA loans. FHA upfront premiums are prorated over a five year period, meaning should the homeowner refinance or sell during the first five years of the loan, they are entitled to a partial refund of the FHA upfront premium paid at loan inception.
    (If any)
    VA funding Fee (If any)
    Flood Fee
    Other Fees More Info

    Other fees could be either additional Administrative Fees that a lender charges or it could be a Flat Fee to cover all lender charges such as: (Origination Fees, Points, Underwriting and Processing Fees, Credit Reports and Tax Service Fees)

    The flat fee does not include prepaid items and third party costs such as appraisal fees, recording fees, prepaid interest, property & transfer taxes, homeowners insurance, borrower’s attorney’s fees, private mortgage insurance premiums (if applicable), survey costs, title insurance and related services.

    Total Lender Fees
    *Actual rates and other information may vary. Sponsored results shown only include participating lenders. The information you enter on this page will only be shared with lenders you choose to contact, either by calling the phone number or requesting a quote.
    Current Mortgage Rates as of December 11, 2018
    • Lender
    • APR
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    Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Click here for more information on rates and product details.
  • Sources

    Learn About Costs: https://www.consumerfinance.gov/owning-a-home/process/explore/learn-about-loan-costs/

About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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