How to Calculate Mortgage Closing Costs

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Closing costs are separate from your down payment. They don’t go toward the equity you have in the home. No matter which loan program you choose for your mortgage, there will be closing costs when you sell. The only exception is when you choose a program that lets you roll closing costs into your loan term or if you sell your property to an investor.

The best way to find out exactly how much your closing costs will be is to ask your lender for a closing sheet. This can be provided as early as you need it, including before you start the process to sell a property. Knowing what the mortgage closing costs are can be a determining factor in whether you sell the property. It’s therefore important to understand them as early as possible in the process.

Keep reading to learn how to calculate mortgage closing costs and what closing costs are made up of.

Pre-Paid Costs

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Pre-paid closing costs are expenses you pay in advance of selling your property. Some of these charges are additional payments, while others are just payments made upfront instead of month-by-month during the selling process. How these costs are calculated varies depending on the lender.

Usually, pre-paid costs comprise of several months of property tax. How much is owed in property taxes depends on your county’s property tax rate and the value of your home. For example, in Round Rock Texas as of 2020, you can expect to pay around $336 per month on a $200,000 home.

Lenders may also require the purchase of homeowners insurance upfront. Yearly premiums are around 0.5% of the value of the property.

One Time Fees

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The other side of closing costs comprises of fees you only pay once. The first is an application fee. Although you hardly ever need to pay an application fee before applying, you’ll probably have to cover it at closing. An application fee may run a few hundred dollars. According to Banks.com, lender application fees generally range between $300 to $500.

Some states also require sellers to pay an attorney’s fee. The attorney may need to be present when you close your purchase. You can shop around for an attorney on your own to find the best price. According to ListWithClever, real estate attorney fees can charge between $150 to $500 per hour or a flat fee between $800 to $1,500 when selling a property.

The largest fee to pay as a one-time payment when selling a property is the loan origination fee. This is usually around 1% of your loan value. So, if you are borrowing $200,000 to fund the real estate sale, the origination fee will be $2,000. This payment goes to your lender for preparing your loan and helping you to the closing table.

Points Fees

The final part of closing costs that need to be factored in when closing a mortgage and selling a property are points fees. In lender terms, one “point” equals 1% of your loan amount. You can choose to pay points to lower your interest rate.

Make sure to ask your lender how much the rate will be lowered by when considering each point you pay. Your lender should also be able to help you determine if paying points will benefit you. That answer will partly hinge on how long you plan to stay in the home.

Summary: How to Calculate Mortgage Closing Costs

The best way how to calculate mortgage closing costs is to contact your lender. An accurate summary of closing costs expected can be provided. It’s also a good idea to speak to a real estate company to navigate the selling process and understand other fees that will need to be paid. For example, if buying a property alongside selling a house, other closing costs will be present. This includes estate agent commissions and attorney fees (to fund the administration involved in purchasing the new property).

Are you thinking about selling your property in Philadelphia? Selling a property in Philadelphia via Brotherly Love Real Estate skips closing fees, leaving you with more equity. Want to know how much your property is worth? Give us a call today at (215) 769-9875 to get your offer. Or contact us via our online form to find out how much your house is worth.

Read more about selling a property to an investor in our myth-busting guide to see if it’s the right choice for you.

This article is a guest post feature from The Wood Group of Fairway, a Texas mortgage lender with 18 locations across the state. They simplify the process with the perfect mix of technology and real human help.