Usually, the cost of closing can range from 2 to 5 percent of your loan amount. So, if you purchase a $300,000 home, you may pay anywhere from $6,000 to $15,000 at closing.

The cost of closing is separated into three categories:

1. Mortgage lender fees.

Some lenders combine their costs into an origination fee. Others break them down into a list of charges, i.e., a processing fee, a commitment fee, an application fee, an underwriting fee, and a credit report fee. If you’ve locked your interest rate, you may also be charged a rate lock fee (as a percentage of the total loan amount) at closing.

2. Third-party charges.

Third parties don’t work for mortgage lenders. But they do provide services necessary to complete the transaction. Fees may be charged for title transfer, HOA dues transfer, flood certification if a property is in an assigned flood zone, an appraisal, a closing attorney/escrow agent, and other services.

3. Prepaid items.

Prepaid costs deposit into an escrow account, set up by your lender to pay certain property-related expenses. When you pay your monthly mortgage payment to your lender or servicer, a portion goes into escrow, helping pay these expenses each month, as opposed to paying a larger sum once a year. 

Many lenders ask that taxes and insurance be paid using an escrow reserve to ensure these bills are paid on time. However, having an escrow account is optional. It’s the job of your mortgage servicer to manage your escrow account and pay these expenses. Property taxes and insurance premiums may fluctuate each year, causing your escrow payment, as well as your monthly mortgage payment, to change somewhat too. 

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To find out more about your closing costs, you can consult your closing paperwork. Two important closing documents are your Loan Estimate and Closing Disclosure.

Your Loan Estimate is delivered three days after you apply for a mortgage. In it, you’ll see all fees, the loan interest rate, and other costs needed to close on your mortgage. This is your initial estimate and can change during the loan process.

Your lender will send your Initial Closing Disclosure three days before closing. This document details your loan terms, closing fees, and interest rate and should be thoroughly reviewed before closing on your mortgage.

Depending on your eligibility, there may be several ways to help cover your closing costs:

• Down payment assistance (DPA) programs. Not only are many homebuyers unaware of down payment assistance, but they also may not realize that some DPA funds can be used for closing. Many DPA programs specify if funds can be put toward both down payment and closing costs. If you have questions about using down payment assistance, you can contact your Academy Loan Officer.
• Seller concessions. As the market cools, more sellers have been agreeing to concessions—or to pay for some of a buyer’s closing costs. Concessions can also pay for other expenses, like lender fees and points, as long as it’s not the down payment. Ask your real estate agent about asking for concessions to help decrease your loan’s closing costs.

Whatever remaining costs are owed at closing must be paid on closing day, usually with a cashier’s check, certified check, or wire transfer. This may also be called “cash to close.” Once payment is made, and your mortgage funds and records, you’ll officially become the owner of a new house. You’ll usually get the keys to your home on closing day unless the seller has requested post-closing occupancy in your contract.