1. What Are Closing Costs?

Closing costs are the fees and expenses you pay when finalizing a real estate transaction, whether you're buying or refinancing. These costs typically range from 2% to 5% of the loan amount and include various lender fees, third-party fees, and prepaid expenses.

2. How Closing Costs Are Calculated

The total closing costs are calculated by summing all individual fees:

Where:

• Lender Fees - Origination fees, underwriting fees, processing fees
• Title Fees - Title search, title insurance, settlement fees
• Appraisal Fees - Property valuation costs
• Taxes - Property taxes, transfer taxes, recording fees
• Insurance - Homeowners insurance, mortgage insurance
• Other Fees - Survey fees, attorney fees, escrow fees

3. Importance of Calculating Closing Costs

Details: Understanding closing costs helps buyers budget properly for their home purchase and compare loan offers from different lenders. These costs significantly impact the total amount needed at closing.

4. Using the Calculator

Tips: Enter each fee category in dollars. Contact your lender or review your Loan Estimate form to get accurate figures for each category. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the average closing cost percentage?
A: Typically 2%-5% of the loan amount for buyers, 6%-10% for sellers (including realtor commissions).

Q2: Can closing costs be rolled into the loan?
A: Sometimes, but this increases your loan amount and interest paid over time.

Q3: Are closing costs negotiable?
A: Some fees can be negotiated or shopped for (like title services), while others are fixed.

Q4: What's the difference between closing costs and prepaids?
A: Closing costs are fees for services, while prepaids are upfront payments for expenses like property taxes and insurance.

Q5: When are closing costs paid?
A: At the closing/settlement meeting when you sign the final paperwork.