What to Expect from Closing Costs

There are certain standard costs associated with closing the sale of a house. These fees are split between the buyer and the seller, as spelled out in the sales contract. As your Pinnacle mortgage expert negotiates the contract, they will help you get the sales price you want and limit the number of closing costs you’re responsible for.

Buyers will receive a “good faith estimate” of closing costs at the time the loan application is submitted to the lender. The estimate is based on the loan officer’s past experience and we’ll be glad to review the estimate for you.

Overview of Standard Closing Costs

Loan Origination Fee: The loan origination fee may be a percentage of the mortgage amount, and covers the administrative expenses of processing the loan.

Points (optional): Home buyers can pay points to lower the interest rate at which the loan will be repaid. One point equals 1% of the mortgage amount. For example: 1 point on a $150,000 loan would equal $1,500

Appraisal Fee: Payment may be required by the lender at the time the loan application is submitted for the house appraisal fee.

Credit Report: Fee for lender to run a credit report, determining the creditworthiness of the loan applicant.

Interim Interest Payment: Typically buyers are required to pay interest on a mortgage loan to cover interest accrued between the closing date and the first mortgage payment period. For example: If closing is on May 15, interest accrual begins that day, but the first payment won’t be collected until July 1. Scheduling closing towards the end of the month will lower your closing costs.

Some lenders will also permit you to receive an interest credit if you close by the 5th business day of the month. For example, if you close on May 5, your first payment will be due June, 1. On the settlement statement, the lender will credit you for 5 days of interest since you’ll make a full month’s payment on June 1.

Escrow Account: Payment if lender is paying home insurance, property taxes and/or other expenses out of the escrow account.

Homeowner’s Insurance: Covers replacement costs for damages caused by fire, wind or other disasters that affect the value of the property. Policies typically include personal liability and theft coverage.

Flood or Quake Insurance: Additional hazard insurance coverage required for homes located in designated hazard zones as established by the Federal Emergency Management Agency (FEMA).

Private Mortgage Insurance (PMI): Required for conventional mortgage loans when borrower’s down payment on the house is less than 20% percent of the total loan value.

Title Insurance: Policy protects the buyer and lender by insuring a clear chain of title, meaning that the person who sells the house has the legal right to do so.

Taxes: Property Taxes, Transfer Taxes, and Recording Fees