Estimated Mortgage Closing Costs

At various points in your mortgage loan application process, you are entitled to get estimates of the closing costs and fees associated with getting a mortgage and going through settlement..

The Good Faith Estimate

With such a long list of potential charges at settlement, it is important to know what to expect. The Real Estate Settlement Procedures Act (RESPA) requires your mortgage lender to give you a Good Faith Estimate of all your closing costs within 3 business days of submitting your application for a loan, whether you are purchasing or refinancing the home. This is a good faith estimate, but the actual expenses at closing may be somewhat different. If you are purchasing the home, you will also get an information booklet, Buying Your Home: Settlement Closing Costs and Helpful Information.

Truth In Lending Information

For new home purchases, the mortgage lender is required, under the Truth in Lending Act, to provide a statement containing Good Faith Estimates of the mortgage closing costs of the loan within 3 business days of submitting your mortgage loan application. This estimate will include your total finance charge and the annual percentage rate (APR). The APR expresses the closing cost of your loan as an annual rate. This rate is likely to be higher than the stated contract interest rate on your mortgage loan because it takes into account discount points, mortgage insurance, and certain other mortgage loan fees that add to the closing cost of your home loan. When refinancing your mortgage, you will receive the truth in lending disclosures before you settle.

The HUD-1 Closing Statement

When you purchase a home or refinance your home mortgage, the Real Estate Settlement Procedures Act also requires the mortgage lender to give you a copy of the HUD-1 or HUD-1A Settlement Statement one day before you go to settlement, if you request it. This final statement of settlement closing costs will show all the mortgage loan fees and mortgage charges you will be expected to pay at settlement.

Fees Paid Outside Of Closing

Some mortgage loan fees may be listed on the HUD-1 and marked as Paid Outside of Closing (or POC). You will pay some of these mortgage loan fees, such as for credit reports and appraisals, before settlement. Other mortgage loan fees, such as those to a mortgage broker, you will pay at settlement.

Sample Closing Costs

Because closing costs may vary from one area to another and from one mortgage lender to another, the following example is an estimate only. This example is based on a $150,000 home with a 5% or a 20% down payment. Excluding reserves for property taxes and down payment, settlement closing costs for the 5% down payment loan vary between $4,690 and $13,940; settlement closing costs for the 20% down payment loan vary between $4,285 and $12,060. Your closing costs may be higher or lower than the examples below.

For more helpful mortgage tips on mortgage closing costs, mortgage refinancing, home mortgages, reverse mortgages or a home equity line of credit, contact FreeLoanComparison.com today!

Last update: November 14, 2008