There are three components due at closing when buying a home and getting a home loan. The first is the mortgage down payment. Next are the mortgage prepaids. The third and final component are the actual mortgage closing costs for the buyer.
As an FYI, when buying a newly constructed home the new construction closing costs for a buyer are typically higher. In an unrelated note, in the event you plan on selling a home a seller’s net sheet calculator can provide an estimate of the proceeds from the sale.
Closing Costs for Buyers
The general population often calls the total funds due at closing the “closing costs”. That is inaccurate. This page covers the actual closing cost for a buyer, not the mortgage down payment or the mortgage prepaids. Below is a breakdown of the estimated closing cost for a buyer using conventional financing. FHA, VA, and USDA home loans will have comparable fees but may require mortgage insurance premiums or funding fees.
Estimated Closing Costs for Buyer
We use conservative estimates to ensure there won’t be any surprises at closing. Remember that all lenders must call their fees “origination charges”. These are the only fees that differentiate lenders since all other fees involved are from third parties. Estimated closing cost for buyer are approximately $2,750 in Texas.
Points = $0 (Zero)
The majority of loans we originate do not have any origination points or discount points.
Lender fees = $1,385
The Origination Charges are the true lender fees of the loan and every lender must call the aggregate of their fees an “origination charge” on a Loan Estimate (LE). All other fees aside from this charge will be comparable regardless of the lender as the lender does not dictate any of the other fees aside from this charge. Our origination fees range from $1,250 to $1,385 depending on the program. This typically consists of a $400 underwriting fee and an $985 admin fee which totals $1,385.
Other mortgage related fees = $600
The other mortgage-related fees will be the same regardless of lender. There may be a few dollar differences depending on the service providers used but these fees are within tens of dollars from lender to lender. The other mortgage-related fees consist of a $450 – $550 appraisal (depending on the loan program), a $70 tax service fee, a $27 credit report, and a $10 flood cert which totals approximately $600.
Title fees = $615
The title fees will be the same regardless of lender. The contract will ultimately state which title company will be providing title services – so if you have a preferred title company be sure to include them on the contract during the contract negotiations. The title fees typically consist of a $300 settlement fee, a $250 owner’s title policy, and a $65 tax cert fee.
Miscellaneous fees = $150
There may be other non-lender, non-title company fees depending on the loan and property. The one certainty is the county’s recording fee which typically estimates to be $150. Some examples of other miscellaneous fees that may exists are: a survey fee, HOA transfer fees, second lien lender fees, a final inspection, etc.
There are three major assumptions being made in the aforementioned breakdown and we are excluding some fees. The other potential closing costs for buyer are: the owner’s title policy, the survey, and any applicable HOA fees.
Lender’s title policy
The seller will typically pay for the title policy for an existing home purchase. A common exception is when you’re buying from a builder – see new construction closing costs. The title policy fee varies based on the purchase price.
The lender’s title policy for purchase loans is based on the home’s purchase price. Similarly, the title policy for a refinance is based on the home’s loan amount. A title policy calculator can provide an estimate of these costs.
Sellers typically provide a survey for the purchase of an existing home (that is not a bank-owned property). A common exception is when you’re buying from a builder.
The sellers often pay for a new survey in the event they don’t have one (or if what they have is not accurate). This is part of the negotiations in the purchase contract and is not a “given” so consult your Realtor. The costs of a survey is about $400. (Note: Texas loans must have survey. Loans in other states may not require a survey.)
HOA fees are property specific. Condos, town homes, and new construction will typically have HOA fees. There is an addendum to the contract that can limit closing costs for buyer on the HOA transfer fee. Consult with your Realtor to ensure you’re protected.
HOA transfer fees typically range from $100 to $500 for existing homes. They are one-time fees charged by the HOA when ownership is transferred. The HOA transfer fees build the HOA’s cash reserves. We call them “welcome to the neighborhood” fees.
HOA dues will be pro-rated at closing in the mortgage prepaids section of the Closing Disclosure (CD).
Second lien fees
Buyers can expect an additional $500 to $700 when getting a second mortgage. Second lien mortgages that act as bridge loans will often include 1% to 2% mortgage points.
We Secret Shop
How to compare closingRegardless of what lender you choose or what program you choose costs exist. There are various methods on how to pay for closing costs and compare mortgage offers so be sure you’re comparing apples to apples. Our recommendation is to only compare the lender fees as the down payment, third party fees, and prepaids will be the same regardless of lender.
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