Mortgage Closing Costs: What They Are and How Much You Can Expect To Pay

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Buying a home can be a complex process, especially if you’re financing the purchase with a home mortgage loan. The purchasing process itself can be just as challenging as finding the right home, making an offer, performing home inspections, and getting appraisals.

When you secure your financing with a mortgage company, you’ll have to pay closing costs more often than not. These costs are a necessary part of the process, but what are they? This article explores just that and guides you in estimating what you might pay.

What Are Closing Costs?

Mortgage closing costs are fees that you have to pay to close on your home. These costs are above and beyond your down payment. These expenses include appraisals, property taxes, insurance and other fees. Here are some examples of fees that you might see included in closing costs:

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How Much Will You Pay?

When you submit a loan application, lenders are required by law to provide you with a good faith estimate of the loan amount, which includes closing costs. Closing costs can be anywhere between 3% to 5% of the total purchase price.

The average closing costs for a home purchase in 2020 were $6,087 including taxes and $3,470 excluding taxes, according to ClosingCorp. Closing costs for a single-family residential property refinance last year were $3,398 including taxes and $2,287 excluding taxes.

Sometimes you can negotiate for the seller to pay closing costs. However, some mortgage brokers will let you roll them into the loan if you have to pay them yourself. Check with your mortgage broker to find out.

Advice for Homebuyers

Buying a home can be an exciting venture, and it’s easy to overlook common home-buying mistakes that can lead to unexpected and unnecessary out-of-pocket expenses. Examples include not paying attention to your credit score, not using a buyer’s agent and more. Check out GOBankingRates’ guide to avoiding 17 common home-buying mistakes that can hurt your wallet.

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