A question that often gets overlooked by homebuyers during the mortgage loan application process is the breakdown of closing costs. Lenders typically provide a Loan Estimate or a fee sheet, but it is actually impossible to give an exact number until a property is in escrow.
Fixed and Variable Closing Costs
Some examples of closing costs include title insurance, escrow fees, recording fees, prepaid interest, property taxes, and homeowners’ insurance. These costs vary based on the vendor used in the transaction and when the escrow is closing. Other fees can vary based on the type of property you are purchasing. For example, if you are purchasing a condominium or townhome, a Homeowners Association Questionnaire (HOA) may be required. The cost of this depends on how the HOA provides the information and if they use a third-party service.
Mortgage lenders can provide estimates for these fees, but generally speaking, the lender does not select the escrow & title companies used during a transaction.
Lender-Specific Fees
Lenders can provide more definitive estimates of some closing costs because they are standard fees they charge, such as underwriting fees, or they are for services provided by outside companies or third-party servicers that the lender partners with—like the appraisal report, credit report, and flood certifications.
Preparing For Your Real Estate Closing
Without an accepted purchase offer, you will not have exact numbers, but you can still plan for closing. Budgeting 2% of the purchase price for closing costs, in addition to your down payment, is a conservative measure. Having a buffer for additional liquid assets for closing never hurts.
If you have further questions, please contact our office at (760) 930-0569 to speak with one of our Mortgage Loan Originators.
