How are closing costs calculated and what are they for?

Question

It's on a 235,000 thousand dollar house with 20 percent down and a 6.375 fixed rate 30 year mortgage. How much will they be?

Answer 1

It varies on the financial institution, they legally have to tell you the cost.

Typically the cost of closing is to set up the loan do the paper work, recording fees, inspection fees, title service fees, commissions etc etc.  There are some places that don't charge closing costs.  I believe Bank of America offers this, but double check to make sure.

Answer 2

You should expect at least 10k, probably closer to 15k.  There is no way to tell as you did not specify fha, conventional, what state the property is in, points, seller concessions etc.  If your in NY or Fl, then think 15k, these states have extremely high title and recording costs.  The deed and mortgage recording and tax in both states would cost you an easy 5-7k, not including title costs.  Just remember by law your entitled to see the hud 24 hours prior to closing.  The good faith should be close, but they are more difficult to do on purchase transaction as so much changes from the time of creation

Answer 3

There is no way to tell, because we don't know how many points you are paying on the loan, if you are buying it down, how the title fees work in your state, etc.

Closing costs are costs associated with purchasing the home.  These are different from prepaids.

Prepaids are expenses that will occur every year associated with home ownership such as HOA fees, taxes, and hazard insurance and appear on your Good Faith Estimate, itemized.

The majority of closing costs are what the lender is directly charging you to obtain the loan, and if you read from the top down and also appear on your Good Faith Estimate.  Examples are origination fee, discount fee, underwriting fee, processing fee, appraisal fee, etc.   These appear in the upper portion of the GFE.

Other costs NOT charged by the lender are charged by the closing agent such as title insurance, title search, attorney fee, recording fee, etc.