Does a Mortgage Include Closing Costs?

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The world of home lending is full of various types of loans, properties, taxes, fees and regulations. Understanding how these processes actually function can help you save both time and money on your next home purchase.

During a home sale, multiple groups and organizations must be involved in order to maintain high standards within the real estate and lending market. These regulations are put in place to protect all parties involved, but the time spent to enforce these rules has a very real cost associated with them, closing costs.

Every Mortgage Has Them

In order to cover the fees of various third parties that conduct surveys, inspections, assessments and facilitate the sale itself, closing costs are due before the sale can be finalized. These costs are above and beyond the price of the home and aren’t reflected in the sticker price you see on the listing.

Other items included in closings costs include:

  • Origination fees
  • Underwriting fees
  • Agent commissions
  • Applicable taxes
  • Administrative and filing fees

What some buyers aren’t aware of is that closing costs happen on both ends of the deal leaving both parties with a separate financial responsibility. Some sellers will offer to cover closing costs as part of the deal in order to make the process as simple as possible for the buyer, along with saving them thousands of dollars.

How Much Are Closing Costs?

Closing costs will vary between different lenders, states and agents. That being said, there are fair practices in place that have created a range of 3-6% of the final purchase amount of the home. For a $250,000 home, closing costs could be anywhere from $7,500 to $15,000. Don’t let the wide range concern you, all lenders are required to present an estimate to you after receiving an application.

The loan estimate you receive will cover all aspects of the loan. The type of loan, repayment terms, interest rate and a list of closing costs. Always review these costs to make sure each one is applicable but also understand there are many parts to a home purchase and each one has a team of employees working diligently to keep every party safe.

Closing Cost Options

Making sure that the mortgage lending process is properly conducted saves consumers from being stuck with a property that is worth little compared to what they paid. Closing costs are a drop in the bucket compared to the potential risk involved in an unregulated home purchase. Even so, no one wants to spend extra money after already committing to paying a hefty sum for a home.

One approach is to work with the agent or owner of the property. If your seller is willing to cover the closing costs, you could have an easy way to keep your total purchase price as close to the original as possible.

Some lenders will offer the option to roll your closing costs into the mortgage itself. As this is adding to the loan, your interest rate and monthly payments may see an increase which is important to consider.

If you have any other questions about mortgages, closing costs or the various types of loans available, take a minute to chat with the Potempa Team and find the perfect solution to your home lending needs.

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