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Calculating Home Closing Costs
Understanding exactly how much money you’ll need for closing costs can be confusing — and if it’s your first time buying a home, you may need some help estimating closing costs. Our closing costs calculator will help you get an idea of the expenses you’ll encounter at closing. And along the way you’ll also learn about what these various fees cover at closing.
It can be difficult to find the loan that best suits your down payment needs. When cash-on-hand is hard to come by, VA and FHA loans offer key options to help you get into a home you can afford. This closing cost calculator can help you understand what kind of savings you’ll need at the closing table. Here are some key details on lending and underwriting for these types of loans.
FHA loan details. FHA loans have unique charges compared to conventional loans. They’re popular because they keep the down payment costs low, but you’ll usually find an upfront fee of about 1.75 percent of the purchase price added to the loan.
VA loan details. You’ll find an additional fee added to VA loans ranging from 1.25 percent to 3.3 percent. With a VA loan, no down payment is required, but other fees are applied to the cost of the loan.
How are Closing Costs and Hidden Fees Calculated?
When you purchase a home, you’ll have to pay taxes and fees on the property, but there’s likely more to pay. You’ll also find other charges at closing like property-related prepaid fees and private mortgage insurance charges. Buyers can expect to find fees that will be paid to the title company hosting and processing the closing, among many others. One potentially large amount of money you’ll need to pay out-of-pocket is the remainder of your down payment — the first portion was paid in the form of earnest money. Ask your lender for an updated closing estimate to help you calculate your closing costs and help keep those illusive hidden fees in check so they don’t take you by surprise.
After your loan is approved, you’ll get a closing estimate from your lender which will include details on the “cash to close” amount that you’ll need to bring to the table. Closing cost calculators are great for estimating what you’ll owe when paying cash for what remains of your down payment. But you should know that most title companies will require a certified check from you and may not accept cash.
Sellers can usually expect to pay out about 3 percent of the total purchase price in the form of realtor fees at closing. Negotiations can change how much the buyer or seller will be required to pay, though. When it comes to your down payment, closing cost calculators are great for understanding what the remaining amount due is going to be.
What’s Included in Closing Costs and Hidden Fees?
Closing costs include everything from property-related expenses — like the cost for a flood certification — to loan-related fees like the application fee and the cost for the title search. When your state requires an attorney, you’ll likely find that “hidden expense” included at closing. Here are a few examples of closing costs that can catch new homebuyers off-guard.
Points and Lender Fees
Points and lender fees are origination fees usually paid to the lender. They’re usually made up of loan origination fees, mortgage broker fees and discount points. These costs pay for the servicing and underwriting of the loan and they can include fees to help secure a discount in your lending rate, if you choose.
Third-party fees are payments due at closing that aren’t directly related to municipal taxes or lender fees. They consist of various costs like appraisal and inspection fees that are usually paid for from your own funds. Your homeowners insurance premium can also be considered a third party fee.
Pre-paid fees due at closing are costs that your lender will charge you. Prorated interest expenses, annually-due taxes, HOA dues and monthly insurance mortgage premiums are paid in this section of your closing statement. Your homeowners premium is another example of a monthly expense that may be part of these pre-paid fees that are not directly tied to lending fees.
Otherwise known as escrow fees, these are moneys due at closing and are payable to the escrow company, the attorney attending the closing and the title company that typically hosts the closing event. Escrow costs are comprised of fees required to administrate and the cash held in escrow prior to closing.
What Other Hidden Fees Should I Consider?
Depending on the needs of your new home, you may find there’s more to pay out-of-pocket to get your home move-in ready. These hidden costs may not be due at closing, but you’ll have to front the funds nonetheless. You may need to have the home professionally cleaned before you arrive. That can run anywhere from $150 -$250. Does the furnace need to be tuned up? A typical HVAC inspection can run you anywhere from $300 - $500. Do you need to get rid of a garage full of junk? Disposal costs average another $250 - $500.
About Our Home-buying Experts
At American Family, we’re not like just any insurance company . Our commitment is to inspire, protect and restore your dreams. It’s our mission to give you the tools and support you need to make important decisions in your life that help you realize those dreams.
While you’re reviewing your finances and exploring ways to fund the purchase of a home, remember to make time to connect with your American Family Insurance agent. They can help you customize a policy that meets the exact needs of your new home. And you’ll find real peace of mind knowing that everything you’ve worked so hard for is insured carefully.