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WalletPrep worksheet · Housing

How much are closing costs on a house?

Name ____________________ Date __________

Key ideas

  1. Closing costs come on top of the down payment. Add them to your savings goal. In the example, they add $9,816 to a $35,000 down payment.
  2. Compare origination charges between lenders. Origination charges are the lender's own price for making the loan. They vary between lenders, so line them up side by side.
  3. Most lender fees can't rise after the estimate. Unless your circumstances change, fees paid to the lender can't increase from the Loan Estimate. Some others can rise 10%.

Vocabulary

Closing costs
The fees and prepaid bills you pay to get a mortgage and transfer a home, on top of the down payment.
Loan Estimate
A standard three-page form a lender must give you within three business days of a mortgage application, showing the rate, payment and closing costs.
Down payment
The cash you pay toward a home's price yourself at closing. A mortgage covers the rest.
Closing Disclosure
A five-page form with the final terms and costs of your mortgage, which the lender must give you at least three business days before closing.
Credit report
A record of your credit accounts, payments, balances and some public records, kept by each of the three credit bureaus.
Escrow account
An account your mortgage servicer uses to collect part of each payment and pay your property taxes and homeowners insurance for you.

Work it out

Jordan is buying a $350,000 home with 10% down, a $315,000 loan. His Loan Estimate lists these closing costs. The figures are an example; yours depend on your lender and state.

  1. Origination charges
  2. Services you can't shop for
  3. Title and settlement services
  4. Taxes and government fees
  5. Prepaid insurance and interest
  6. Initial escrow deposit
  7. Total closing costs
  8. Down payment
  9. Cash to close

Check yourself

  1. Your loan is $250,000 and you pay 1.5 points. How much do the points cost?

    • A. $1,500
    • B. $2,500
    • C. $3,750
    • D. $37,500

  2. Which of these is a prepaid cost at closing?

    • A. The first year of homeowners insurance
    • B. The appraisal
    • C. The origination fee
    • D. The recording fee

  3. With no change in circumstances, how much can fees paid to your lender rise from the Loan Estimate?

    • A. Up to 10%
    • B. By any amount
    • C. Up to 5%
    • D. Not at all

Your turn

Add a closing cost line to your down payment savings goal. Ask one local lender what buyers in your area usually pay, or pull the figures from a Loan Estimate, and add that amount to your target.

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Answer key

How much are closing costs on a house?

Work it out

  1. Origination charges$1,575
  2. Services you can't shop for$750
  3. Title and settlement services$2,100
  4. Taxes and government fees$1,400
  5. Prepaid insurance and interest$2,641
  6. Initial escrow deposit$1,350
  7. Total closing costs= $9,816
  8. Down payment$35,000
  9. Cash to close= $44,816
  1. Prepaids are a year of homeowners insurance, $1,800, plus 15 days of interest: $315,000 × 6.5% ÷ 365 × 15 = $841. Together, $2,641.
  2. The escrow deposit covers 2 months of insurance, $300, plus 3 months of property tax at $350, $1,050. That is $1,350.
  3. All closing costs total $9,816, about 3.1% of the loan. Add the $35,000 down payment and Jordan needs $44,816 at closing.

Check yourself

  1. C. $3,750 One point is 1% of the loan. $250,000 × 1.5% = $3,750.
  2. A. The first year of homeowners insurance Prepaids are bills paid in advance, like insurance, interest to the end of the month and property taxes.
  3. D. Not at all Fees paid to the lender, a broker or their affiliates for required services can't increase unless your circumstances change.