Get a Loan Estimate
Before you sign an agreement for a mortgage, ask about the closing costs you’ll be responsible for paying. All lenders are required to provide a Loan Estimate, informing you of the important details of the loan you applied for, including and estimate of the closing costs you’ll have to pay. Your lender will then share the total amounts and final terms of your loan in a Closing Disclosure statement at least three days before your closing.
Here’s an example of some standard closing costs – there may be others depending on your situation:
- Application fee (covers the cost of processing your application).
- Appraisal (a determination of the value of your home).
- Attorney fee (for review of closing documents for the lender).
- Credit report fee (the cost of pulling your credit report).
- Escrow deposit (to usually cover two months of property tax and homeowners insurance payments at closing).
- Origination fee (covers the lender’s administrative costs).
- Private mortgage insurance (if applicable, the first month’s PMI payment may be due at closing).
- Recording fees (fee charged by the local city or county for recording of public land records).
- Title search and title insurances (protects the lender and/or owner if there is a problem with the title).
Who Pays Closing Costs?
There are always costs associated with closing a loan, but it’s a matter of who pays for them. Here are some examples of ways closing costs can be paid:
- Pay cash for closing costs when you sign your loan.
- Finance the closing costs into your mortgage.
- Negotiate with the seller to pay a portion of your closing costs as part of the purchase agreement.
- Your lender may absorb some of the closing costs in exchange for a slightly higher interest rate.
If you have the option to wrap your closing costs into your mortgage loan, you could use your cash for the down payment instead. Keep in mind that financing your closing costs increases your loan amount, which means you could have a higher monthly payment and pay more in interest.
Be Prepared
Meet with your mortgage lender to ask questions about any closing costs, fees, or terms you don’t understand. Knowing what to expect and how much you’ll pay can help you avoid any surprises on closing day.
Please note, membership is required to accept a DCU mortgage.
This article is for informational purposes only. It is not intended to serve as legal, financial, investment or tax advice or indicate that a specific DCU product or service is right for you. For specific advice about your unique circumstances, you may wish to consult a financial professional.
