By Jennifer Tucker
December 9, 2022 | 4 Min. Read
It’s finally here—the day you get the keys to your new home! When you attend your mortgage closing meeting, you’ll need to be prepared to bring a check for more than just your down payment. At this meeting, your lender will also collect the closing costs related to sealing the deal. These fees usually cover things like appraisals and inspections, loan applications, and originating and underwriting the loan.
Let’s look at closing costs in the mortgage process to understand how they work and answer some frequently asked questions.
Closing costs are the expenses a buyer pays to complete the purchase of a home. They can represent a range of fees, including costs associated with appraisals and inspections, loan applications, and originating and underwriting the loan.
Closing costs include both property-related fees (associated with verifying the home’s value) and mortgage-related fees (associated with preparing the mortgage). Some common property- and mortgage-related fees include:
The amount you pay in closing costs will vary but commonly depends on three key factors:
The specific closing costs and fees you’ll pay depend on your lender, the type of loan, the terms of the real estate transaction, and the state you live in. On average, closing costs may be about 2 – 5% of your loan amount. The fees will appear on the Good Faith Estimate that lenders must provide as part of the loan application process.
Marine Credit Union offers a variety of free budgeting and financial planning tools. Use our free online calculator to calculate your home closing costs.
If you have low or bad credit, these costs can add onto an already sensitive mortgage repayment situation. It is important you understand the entirety of your financial responsibility for a mortgage before taking out a mortgage loan with bad credit.
You’ll pay closing costs when you attend the closing meeting to complete the purchase of your home. At this meeting, your lender will take your down payment and any additional costs you need to pay for closing.
You might wonder if the buyer or the seller of the home pays for closing costs in a real estate transaction. Usually, the buyer is responsible for paying the majority of the closing costs. The seller also incurs fees as part of the transaction, such as transfer taxes and attorney fees. The amounts the buyer and seller pay will vary from transaction to transaction.
It’s difficult to avoid closing costs altogether, but there are some ways to negotiate or reduce the fees you’ll face at closing.
There are many state and local housing programs that are offered. HUD has a comprehensive list of programs for each state. Greenpath homeowner counseling also offers education and guidance for mortgages, which includes payment assistance programs.
Marine Credit Union can help you find the right mortgage loan to reach your goals. Keep your loan in the community. Get in touch with a Marine Credit Union lender today.