What's in a Closing Cost?

Updated: Mar 3

There are several expenses involved in a mortgage process, from down payments to various fees. Being prepared for the money you need to have on hand is an important factor in successfully obtaining a mortgage loan.

At Security First Financial we can help you organize all your costs regardless of which loan options you choose. This includes closing costs, which can comprise a variety of fees and expenses. Here are a few things to keep in mind when planning for closing costs.

Closing Costs Explained

Closing costs refer to a number of different fees required to close the loan on the home. Most of these fees are paid near the end of the process, but some can be paid earlier on.

Included in these costs are things like underwriting fees, credit report costs, home inspection and appraisal dues, attorney payments, and loan origination fees. Which of these costs you’re responsible for will vary according to your unique situation. For example, some lenders will cover portions of your closing costs as part of their loan programs, while various states or municipalities may have slightly different requirements.

Calculating Your Closing Costs

In most cases, you can expect to pay closing costs that amount to between two and five percent of the total purchase price of the home. If you want an idea of what you might pay for a given loan, there are plenty of mortgage calculators available online to assist you. In the end, though, the most reliable way to get an exact idea of your closing costs will be to view the loan estimate sent to you by your lender during the process.

Payment Options

There are a few different ways that closing costs might be paid during the mortgage process:

  • Negotiated into the offer: In some cases, closing costs will simply be negotiated into the purchase offer for the home, dictating that either the buyer or seller pays the required amount.

  • Financing: In other situations, you might be able to slightly increase the amount of your loan to cover closing costs, which folds this amount into the monthly payments you’ll make toward the mortgage.

  • No closing cost loan: There are certain loan options out there designed to eliminate closing costs for people who may not have the funds immediately available to pay them. Be aware, however, that these loans will come with higher interest rates that may cause you to pay more over the life of the loan than you would have by just paying your closing costs upfront.

Contact your local Loan Originator today to learn more about your home financing options.

Contact Security First Financial

Opinions expressed are solely my own and do not express the views of my employer.

Original blog post by Primary Residential Mortgage, Inc.

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Security First Financial is a division of Primary Residential Mortgage, Inc. PRMI NMLS 3094. Branch NMLS ID# 385589. PRMI is an Equal Housing Lender. Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. Programs, rates, terms, and conditions are subject to change and are subject to borrower(s) qualification. This is not a commitment to lend. Colorado – Regulated by the Division of Real Estate, UCCC #987701-016. Arizona – Arizona Department of Financial Institutions 0902614. Massachusetts – Licensed by the Massachusetts Division of Banks as a Broker and Lender as #MC3094. Florida - Florida Office of Financial Regulation MLD646. Texas - This office is licensed and examined by the Office of Consumer Credit Commissioner of the State of Texas. 

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