closing costs? 5k or 10k?

Question

I spoke with a guy at lending tree, and said i was looking at a 185k house with about 50k down on a 15 year mortgage.  He said closing costs would likely be 5k.  But when i asked the realtor, she said 5-6% which would be about 7-8k or so.  What would it be?

Aaron McGinnis · Answer

Believe the mortgage officer, not the agent.

Jon Holdman · Answer

You can ask the lending agent for a breakdown.  Then show it to the agent and see what's missing, if anything.

I would usually estimate about 2% of the purchase price for closing costs and another 1 to 1.5% of the loan amount for loan closing costs.

What's in there?  For the loan, you'll have:
origination fee: defaults to 1%, but you can pay more for a lower interest rate.  Sometimes less if you take a higher interest rate.
underwriting fee:  $500 plus or minus.  somewhat negotiable
doc prep fee: a few hundred, also somewhat negotiable
various other fees: maybe a hundred
lender's title policy: variable, but something like half a percent of the loan amount

Property closing:
inspection fees: few hundred.
appraisal: $500 more or less.  The lender will require this, but I put it here since you may want it even without a lender.
various recording fees: highly variable, maybe a few hundred
prepaid insurance: typical a full year plus two months.  The full year pays for the initial policy and the two months starts the escrow
prepaid taxes: some number of months.  What makes sense to me is the number of months already passed in the year plus a month or two.  Taxes for one year are paid in spring of the next year, so the escrow account needs to contain a fully year's taxes at the point where they must be paid.  But the actual amount a lender requests almost seems random.  Note that you will get a credit from the seller for Jan 1 to the date of closing, so you can think of that credit as just going directly into your escrow account.
Title company fees:  a few hundred
Misc fees: photocopying, courier, fedex, etc., etc., etc.

Some locations have various transfer or sales taxes, too, which can add a hefty chunk.