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Mortgage Closing Costs Explained

Below is a list of common mortgage and closing cost terms explained for you.

Please don’t hesitate to contact us. Any of our home loan specialists will be glad to help with any questions you might have.

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Closing costs are the fees and taxes associated with purchasing and taking ownership of your home. Depending on where you live and the complexity of your transaction, they can easily add up to thousands of dollars. They’re generally around 3% to 6% of the purchase price of the home.

They really shouldn’t be “hidden” — your lender is required to give you a written, good-faith estimate of all your closing costs within three days of your applying for a loan. However, don’t go into the process of buying a home without knowing about them.

Points or loan origination fees. This is an up-front payment of the interest that you owe your lender. The range that you’ll have to fork over is anywhere from nothing to about 3% of the loan. Remember, the more points you pay, the lower your overall interest rate should be, and vice-versa. If you’re strapped for cash, you can get a loan with no points, but you’ll pay a higher amount over the life of your loan. Another option is to have the seller pay these costs for you. Ask your buyer broker about broaching the subject with the sellers.

Escrow fees: These are the fees that are charged to process all of the paperwork and keep the money in a safe place while you and the seller dicker over things. Depending on the cost of your home, this can amount to a few hundred to a couple of thousand dollars.

Homeowner’s insurance: You should expect to pay between $500-$2,000 depending on the value of your home and your coverage. You must get this insurance before your lender will release the funds for your house.

Title insurance: What would happen if, six months after you move into your new house, you discover that the person who sold you the house didn’t really own it? Arrgh! While it’s a remote possibility, it does occasionally happen. Luckily, there’s protection against this very problem. Your lender will want you to get “title insurance” to take care of this situation should it arise. Based on the value of your home, expect to pay between $500-$2,000.

Property taxes: Depending on when your purchase actually closes, you may owe the previous owners for taxes that they’ve already paid. For example, say the old owners paid their taxes from January through June. You buy the house in April. Well, they’ve already paid for your taxes for May and June. You need to reimburse them for this expense. In addition you may need to prepay some taxes.

Legal fees: You may not need a lawyer. Ask your buyer broker if she feels that the transaction is complicated enough to hire one. Frequently, home transactions just use boilerplate forms for everything. If this is the case, you will save money.

Private mortgage insurance: We’ve talked about this one earlier. If you have a loan that requires it, count on paying at least a few month’s premiums in advance. Some lenders will want you to pay for an entire year. You can nix this if you can come up with a 20% down payment.

Notary: Yes, someone has to swear that you are who you say you are. Expect to pay about $50 for the privilege.

Document prep fees: Lender and/or broker fees.

Appraisal fees: To give your home a fair market value.

Factual credit report fee: A verified credit report.

Tax service fees: To ensure your taxes are paid each year.

Survey fee. This may be waived sometimes if an existing survey can be used.

Pest inspection fee: If your house is new, this can be waived.

State recording fees: As your state requires.

Please let us know if you have any questions about your mortgage or refinance closing costs.

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Pacific Home Loans, Inc. All Rights Reserved | Pacific Home Loans, Inc. is licensed by California Bureau of Real Estate Broker License #01912112, Arizona License #0931057, Pacific Home Loans, Inc., DBA Washington Mortgage Advisors is licensed by WA DFI License# CL-906167, VA License #MC-5741, HI License# 906167, MD License# 06-20669, DC Licensed# 06-20669, Pacific Home Loans, Inc., DBA Texan Lending & Gulfstream Mortgage Inc., NMLS#906167. www.nmlsconsumeraccess.org. Pacific Home Loans, Inc., is not affiliated with any government agency.
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© 2016 Pacific Home Loans, Inc. All Rights Reserved | Pacific Home Loans, Inc. is licensed by California Bureau of Real Estate Broker License #01912112, NMLS #906167, Pacific Home Loans, Inc., DBA Washington Mortgage Advisors is licensed by WA DFI License #CL-906167, VA License #MC-5741, MD License #20669, Pacific Home Loans, Inc., DBA Hawaiian Mortgage Advisors Lic #906167, NC License #L-164426, DC License #MLB906167, AZ License #0931057, ID #MBL-8911, OR License #ML-5453, Pacific Home Loans, Inc., AK License #AK906167, NV License #4454, PA License #57796, IL License #MB6761193, Pacific Home Loans, Inc., DBA Texan Lending & Gulfstream Mortgage Inc., NMLS #906167. CO NMLS #906167. Rates may change without notice or may not be available at the time of loan commitment or lock in. There is no substitute for a Loan Estimate. Pacific Home Loans, Inc. is not associated with, or acting on behalf of your current lender. Pacific Home Loans, Inc., is an approved VA Lender but not affiliated with any government agency. License information can also be seen at www.nmlsconsumeraccess.org.
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