Closing Cost Expectations

Closing on a new home is exciting, yet costs associated with buying a home are often misunderstood. Don t let unexpected surprises hamper the experience, understanding the closing costs involved will give you peace of mind and make the entire process run more smoothly. There are a few different categories of costs, let s take a closer look.

Closing costs

Expenses for fees such as appraisals, attorneys, credit reports, processing, underwriting, deed recording, tax services, document prep and other miscellaneous lender and title company expenses are called closing costs. These fees are for services performed by the lender, title company, or third party and charged to the borrower. Closing costs are necessary and legitimate; however borrowers should inquire about any fee they don t understand.

Prepaid Expenses

Prepaid expenses include homeowner s insurance, mortgage insurance, prepaid interest and if applicable, the costs required to establish an escrow account. If a borrower has an escrow account, a portion of each monthly payment to the lender is deposited into the escrow account. This account is managed by the lender and is used to pay for annual insurance premiums and taxes. The amount that is collected at closing is based on the current tax bill and the first year s hazard insurance premium along with an additional amount to cushion the account for future payments.

Mortgage Points

Mortgage points, often called loan origination or discount, equal 1 percent of the mortgage loan amount. These points help reduce the loan s interest rate. Generally speaking, it takes 5 years to realize the benefit of paying 1%. Your mortgage professional can discuss further the advantages of paying points and whether it s right for you.

All these costs combined make up your settlement costs. These costs can vary from lender to lender and Home Team Mortgage is eager to answer any questions and walk you through the process. Find us at and contact a qualified loan officer today!

Tom Parker is president of Home Team Mortgage, Ebby Halliday s in-house mortgage source, and a regular contributor to the Ebby Blog. Contact Tom at or 972-665-1900.