How To Calculate Closing Costs When Buying Your Staten Island Home

Buying your dream home can be exciting and terrifying at the same time. There may be terms you’ve never heard before and mortgage contracts may read like a foreign language. Then, the realtor starts talking about closing costs when all you thought you had to worry about was a down payment. Closing on a home purchase doesn’t have to put you in a cold sweat. If you research typical closing fees and estimate your total closing expenses, you’ll have a better idea of your up-front costs prior to making an offer on the home you’ve always wanted.

Handing over keys when signing contract

What Are Closing Costs?

Simply put, closing costs include a variety of fees you’ll have to pay to finalize your real estate purchase. These amounts don’t include your down payment and are charged by the lender and various third parties who assist in processing your home’s purchase. These fees vary across the U.S. and between lenders. According to the Federal Reserve Board (FRB), you should estimate your closing costs between 3{12ca24a05342dbb53daaf6ac9e83dcd1d4a135542302ef678e31135aa120b5f7} and 6{12ca24a05342dbb53daaf6ac9e83dcd1d4a135542302ef678e31135aa120b5f7} of the home’s purchase price. Since closing costs aren’t always included in your loan amount, be prepared to pay these expenses up-front.

Typical Fees Included in Closing Costs

When closing on a home purchase, you’re given a stack of paperwork to look over and sign. Included is a list of fees charged for completing your sale. Although you may not pay all of these varying fees, understanding common fees helps you calculate your closing costs. These fees can be fixed or variable and can include:

  • Credit Check Fee: Fixed amount for running your three credit reports. Average cost $20-30.
  • Loan Origination Fee: Variable amount charged by lenders for processing your loan paperwork. Usually 1{12ca24a05342dbb53daaf6ac9e83dcd1d4a135542302ef678e31135aa120b5f7} of the loan amount.
  • Processing Fee: Lender fee ($300-1,000) to process and prepare your loan paperwork.
  • Loan Discount Points: Variable amount paid to receive a lower interest rate with each point equaling one percent of the loan amount.
  • Appraisal Fee: Amount paid to an independent appraisal company to determine the property’s fair market value that’s usually set between $300-750.
  • Title Search Fee and Insurance: Amount paid to the title company to perform a background check on the property to ensure there aren’t any unpaid tax liens, mortgages or other liabilities on the property and insurance to protect the lender against any unforeseen encumbrances. The insurance varies, but title searches average between $200-400.
  • Survey Fee: Amount charged by a survey company to verify the property lines. Surveys aren’t required in all states and range between $250-1,000.
  • Home Inspection Fee: Amount paid to an independent professional to inspect the home that’s between $225-450.
  • Recording Fee: Amount required by the city or county for recording the sale in the public record. Varies by municipality, but usually about $100.
  • Property Taxes: Amount usually included in your monthly loan payment, but lenders often require you to prepay a specified amount that varies by county and state.
  • Pre-Paid Interest: Variable amount covering any interest accrued up to the first of the month or the due date of your first mortgage payment.
  • Homeowners Insurance: Cost for property insurance to protect your home against loss. Lender’s may require you to pay your first year’s premium at closing.
  • Private Mortgage Insurance (PMI): Cost for insurance to protect the lender from loan default. If your down payment is less than 20{12ca24a05342dbb53daaf6ac9e83dcd1d4a135542302ef678e31135aa120b5f7} of the purchase price, you’ll pay PMI premiums until your principle is less than 20{12ca24a05342dbb53daaf6ac9e83dcd1d4a135542302ef678e31135aa120b5f7} of the property value. Lenders may require your first year’s premium or the entire policy amount at closing.
  • Closing/Escrow Fee: Amount paid to an independent title or escrow company to perform the actual closing on a home purchase. You can generally calculate this amount at $2 per $1,000 of the purchase price plus $250.
  • Escrow Deposit: Amount covers two months’ property taxes, homeowner’s insurance and possibly PMI and held in an escrow account to cover these annual expenses.

Although calculating the costs of closing on a home purchase won’t provide an exact dollar amount, it’ll give you a general idea of what you’ll need prior to your closing date. There are also places online with closing cost calculators to help you determine these fees. However, these calculators are only as reliable as the data provided to make the calculations and you should always receive a Good Faith Estimate from your lender that outlines potential closing costs. You can also sometimes work out a deal with the seller to pay a portion of your closing fees to seal the deal.

By RE Resources Team  on July 06, 2016, updated July 13, 2016