So you’re thinking about buying a new home—congratulations! Perhaps you’re already saving up for your down payment. If so, don’t forget to leave money in your budget for closing costs.
On average, Oregon (and Washington) closing costs will be an additional 3% of the loan amount. This gives a good idea of what you can expect to pay. For example, on a $200,000 loan you can expect to pay $6000 in closing fees.
Common closing cost fees:
If you’re wondering where all that extra money goes, you’re not alone. Here’s a list of fees that are typically associated with closing costs.
Appraisal Fee: The average cost of a residential appraisal in Oregon is $450. This gives lenders an estimate of the value of the home using similar homes which have recently sold in the area. Home Appraisals are necessary to protect the lender from lending more on a home than what it is worth.
Origination Fee: Commonly charged by mortgage brokers or loan officers. I’ve brokers charge anywhere from 0-4% on a loan, although 1% seems to be the norm for traditional loans.
Escrow Fee: This is charged by your escrow or settlement company for handling your loan documents and assisting with the signing.
Title Fee: This fee covers your title insurance, just in case there are hidden liens on your new property.
Hazard Insurance: At closing you will be required to pay for 12 months of hazard (home) insurance upfront. This is to protect you (and your lender) from accidental damage to the home.
Interest: Typically you will be required to pay interest on the mortgage to cover the time between the funding date and your first mortgage payment. For example, lets say your loan funds on May 15 and your first monthly payment begins to accrue interest on June 1. Your first mortgage payment is due July 1. At closing, an interest payment covering the accrual period between May 15 and May 31 may be required.
In closing, here’s some advice:
Your lender should be able to give you a good faith estimate for all closing costs within 3 days of the loan application. Each fee should be listed on a separate line with estimations of the cost.
Sometimes lenders will advertise “No closing costs!†or “No points or fees!†Ask yourself—do you really think these people are working for free? I’m here to tell you that they aren’t. What they’re really doing is charging you a higher rate to either cover all your closing costs or at the very least a portion of them.
If you’re hard up for cash this may be a good option for you, but in the long run it won’t actually be any cheaper.
What I recommend to my clients is to ask the sellers to pay their closing costs. Many are willing to do this. You may not get as low of a price on the home, but your payment will be lower than if you’d taken the higher rate.
If you’d like to discuss loans or closing costs feel free to contact me. Remember, loan officers are here to help—and the good ones will go out of their way to make sure you are satisfied with your loan and the transaction as a whole.
Chelsea Collier is a licensed home mortgage specialist in both Oregon and Washington, as well as a frequent contributing writer for OHM. Please don't hesitate to contact her with any questions you may have about financing (or refinancing) your home.
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