What Makes Up Closing Costs?

Posted by Jace

April 24, 2008

The total closing costs associated with buying a home can vary greatly. Generally speaking, a $200,000 loan will have approximately $5,000 to $6,000 in closing costs. Keep in mind that you can negotiate to have the seller to pay these. Many buyer’s I work with prefer to do this so they can keep more money in savings or use for improvements to the home.

Costs Associated With Your Loan

Loan Origination Fee - Typically 1% of the loan amount. This is usually how the loan officer is paid. If they don’t charge you an origination fee they’re making it up on the interest rate.
Doc Prep Fees - ($300+/-).
Miscellaneous Lender Fees – ($200+/-).
Appraisal – ($350+/-). It’s customary in the Boise area to ask the seller to pay this.
Loan Discount Points – One discount point is 1% of the loan amount. You can pay discount points upfront so you can have a lower interest rate on your loan.
TIP* – Always ask a lender for a “Good Faith Estimate.” This will disclose the fees they intend to charge you.

Pre-Paid/Prorated Items

Pre-Paid Interest – (For your loan). Depends the closing date, if middle of the month then you would pay 15+/- days of prepaid interest.
Escrow Reserves - Prepay several months of property taxes and home-owner’s insurance.

Fees from the Title Company

Escrow Fees – Based on the sales price & usually split equally with the seller.
Property Taxes – Pro-rated based on closing date.
Recording Fees – fee from the county.
Title Insurance – usually seller pays for standard coverage and buyer pays for extended.

There may be other closing costs when buying a home depending on the specific agreement (survey, inspection, etc.). Your agent or your lender should be able to estimate these costs for you.

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