Buyers should expect closing costs that fall into 3 categories:
– fees paid to the lender
– fees paid to the title company
– prepaid items for taxes and homeowners insurance
Fees that are paid to the lender can include origination fees, underwriting fees, various fees such as registration fees, fraud review fees, etc., and the appraisal and credit report fees. Optional discount points may also be paid to lower the buyer’s rate. These fees generally total to about $1600-$2000 depending on the type of loan and the lender. You also will pay a daily interest rate for the remainder of the month, which is calculated based on the loan amount, interest rate, and close date.
Fees made payable to the title company include closing fees, recording fees, transfer taxes, document preparation fees, and other various title fees. These generally total about $750-$1150 depending on the terms of the agreement and title company.
Prepaid items include homeowners insurance – typically paid as 12 months plus 3 months to start your escrow account – and 1-6 months of property taxes, depending on the month in which you close. These fees vary greatly depending on the property tax amount for that particular home (generally based on value), and the rate determined by your homeowners insurance company based on the amount of coverage you select. Generally speaking these fees can range from as low as $1000 or less, to upwards of $3000 or more if the property taxes are high and you select a premium homeowners insurance plan.