The Quick and Easy Guide to Understanding the Math Behind Your Mortgage Closing Costs

Published:
September 15, 2015
Last updated:
June 30, 2022
In This Article

It’s amazing that in a year with extremely low mortgage rates (though they are quite a bit higher today), closing costs are up by as much as 13.4% from the previous year. Part of the reason for this is that the stricter regulations on loans have increased the costs to banks, and they always find a way to pass on new costs to the consumer.

Understanding Third-Party Closing Costs

When closing on a mortgage, the borrower will notice a long list of additional fees that they are expected to pay for. These can range from insignificant into thousands of dollars depending on the state and the deal. When looking at these fees you will notice that some are third-party fees.

This is not out of the ordinary and you are not being taken advantage of. These costs are for services rendered by outside companies at the request of the mortgage lender to make sure everything is in order with the property.

Closing Costs You Can Expect To Pay

Anybody going through the mortgage process for the first time should expect to see several odd sounding terms on the bill. The first is ‘origination’ or ‘processing’ which is the primary fee the lender charges for creating the mortgage.

Other fees include discount points, flood certification, title insurance, credit report, and appraisal. These are all necessary for buying a home and should be expected to appear during closing week.

The Trick Behind Zero-Closing Cost Mortgages

With closing fees adding up it may seem like a good idea to opt for a mortgage that has absolutely no closing costs if it’s offered. While no money will be required upfront, it adds up in the long run.

This is because the lender is making a deal. They agree to pay all the closing costs for the borrower in exchange for a slightly higher interest rate, which will pay out for them over the course of the mortgage.

The amount you can expect to pay really depends on the cost of living and the real estate market where you’re buying. A mortgage lender will be able to talk to you in advance of applying for your mortgage to give you a better idea of what you are looking at paying for closing costs.

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Looking to Apply For a Mortgage?

Do you have questions about mortgages? Are you considering applying for one soon? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington serving the entire state, as well as Oregon, Idaho, and Colorado. Our experts are on standby ready to work with you to help you choose which one of our mortgage programs is best for you, including our Diamond Homebuyer Program, Cash Buyer Program, and Bridge Loans. Contact us today with any questions you have about mortgages.

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