What to Expect During Closing

Many home buyers find the closing process to be fairly mysterious. The following information will explain what you can expect in terms of the closing costs that must be made at closing.

Closing Costs

Closing costs vary by lender and depending on the loan program and loan amount. You can expect your closing costs to be between 2% and 7% of your purchase price. These closing costs can be broken down into prepaid expenses, discount points and out-of-pocket costs.

Discount Points

The second aspect of closing costs are discount points. Each mortgage point is equal to 1% of the loan amount, and each reduces your interest rate by 0.25%. You can choose to pay up to 4 points at closing to lower your interest rate by up to 1.0%.

Out-of-Pocket Costs

Finally, you will also be responsible for third-party closing costs, including attorney fees, a home appraisal, credit report fees, tax service fees, deed recording and more. These fees are for services charged to you by a third party.

Because purchasing a home is a major financial investment, it is important to understand all of the expenses you will be expected to pay to avoid surprises at closing.