The closing costs are something you should think about very carefully when buying or refinancing a home.
I wish I could tell you that closing costs are not expensive, but trust me, they are. When you add up all the fees, like points, taxes, title insurance, county costs, and other fees, it starts to get expensive.
The first thing you need to know is that no one works for free, so be ready to pay when the deal closes.
The total cost of fees depends on a lot of different factors. For example, the amount of loan origination fees (called "points") that the lender will charge you. The title search and insurance are also big costs. The title fee is different in each state and depends on how much the home is worth.
On average, closing costs shouldn't be more than 5 percent of the total price of the home. This doesn't include the down payment.
Not all of the money from these fees goes to the lender. Most of the time, the lender only gets the fee for starting the loan and the fee for applying for it.
The rest of the fees, like the appraisal, credit report, interest for the time between closing and your first monthly payment, home owner's insurance, title insurance, pro-rated property tax, etc., go to the right places.
The lender must send you a Good Faith Estimate before you go to closing (GFE).
The GFE gives you a good idea of how much you will have to pay for all the fees at closing.
Make sure you look over the GFE very carefully, and if there are any fees you don't understand, call your lender or broker and ask for an explanation.
As I already said, you need to be ready to pay the closing costs. Closing costs are not cheap, but you shouldn't pay a dime more than is necessary.
If your closing costs are between 2% and 5% of the total amount of the mortgage, you should be fine.
If they are much higher, you might want to look for another lender.
Remember, do your homework. Put yourself in a position where you can understand all the jargon on the papers you will be signing.
Also, take your time and shop around. Always look for the best rate at the lowest price.
