Estimating Closing Costs

Estimating the Costs of Buying a House

Closing costs and customs vary from state to state and every home buyer's situation is unique. This exercise is meant to give you some idea of what to expect when buying a home in North Carolina as well as suggestions for questions to ask of your lender, attorney, and other parties involved.

You can use this page as a guide and make calculations based on your situation to arrive at an estimate of your costs to buy.

In North Carolina, closings are handled by an attorney but it is not meant to be a legal battle. The attorney is typically chosen by the buyer and handles the paperwork for the buyer, seller, and lender. Sellers do not normally have a separate attorney. The attorney collects and disburses all funds plus oversees the signing and recording of all documents.

A standard federal HUD-1 form is used to list and calculate the collection and payment of all costs associated with the real estate transaction. The mortgage and all closing costs are added/subtracted from the contracted purchase price to arrive at a "bottom line" number that the buyer pays at closing to complete the deal. That amount can be wired directly to the closing attorney from the buyers' bank or the buyers can bring a cashier's (bank) check to closing made out to the closing attorney.

The Example column below shows typical numbers for a conventional (not FHA or VA) loan for 80% @ 5% interest with a closing date of May 15th, annual property taxes of $2000 and annual home owners' insurance of $600 -- just to give you some idea. Additional rules and fees may apply to VA, FHA, USDA and other types of loans.

If you have a relocation package from your employer, ask them which line items they are going to pay for and if they will pay them at closing or reimburse you after closing.

We provide our buyers with a more precise estimate of closing costs during their home buying process.

	Example	*Your Estimate*
Purchase Price	$250,000		As agreed upon in negotiating the Offer to Purchase and Contract.
- Earnest Money	-$2,000		Typically .5 to 2% of purchase price is paid by the buyer and deposited in a trust account when your offer is accepted. This is a negotiable line item in the Offer to Purchase.
- Seller-Paid Closing Costs	-$2,000		If you negotiate for the seller to pay an amount of money towards the buyers' closing costs, subtract that amount here.
- Seller-Paid Repairs Costs	-$0		If, in the inspection & repairs negotiations, the seller agrees to pay the buyer to have some repair work done, subtract that amount here. These payments must be approved by the lender.
- Mortgage Loan amount	-$200,000		Subtract the amount you intend to borrow. Get quotes from lenders and decide where your comfort level is.
= Net Purchase Price Due	=$46,000		The balance you will owe for the house at the time of closing before adding in closing costs.

Costs

Lender Controlled Fees			Fees charged by lenders to provide and process the mortgage will vary greatly based on economic conditions, your credit score, and the type of loan. Get "Good Faith Estimate" quotes from multiple lenders.
Loan Origination Fee	$2,000		Lenders often charge a 1% origination fee but you may see this fee waived when lenders compete for your business.
Application fee	$495		Lenders will typically quote some combination of these first four fees (not all of them) and may call them by different names. Compare total costs as well as rates when choosing a lender.
Underwriting Fee	$295
Processing Fee	$0
Appraisal Fee	$395		The lender passes on the cost to have the home appraised.
Credit Report Fee	$25
Flood Certification Fee	$20
Tax Service Fee	$85
Buy Down "Points"	$0		You may have the option of paying an extra up-front fee to obtain a lower interest rate than you qualify for. Usually only a good idea if you are sure you will stay in the house for at least several years.

Lender Required Escrows & Pre-Paids
Per Diem Interest	$438		At closing, you pay the interest for the remaining days of that month and your first mortgage payment will be due one month after the end of the month you are in. (In this example: July 1.)
PMI Premium	$0		Mortgage insurance is generally required if you are borrowing more than 80% on a conventional loan. This amount can be financed with an FHA loan.
Escrow for Property Taxes	$500		The lender will set this requirement which can vary slightly but is typically from 3 to 6 months' worth and federally regulated.
Escrow for Hazzard Insurance	$200		The lender will set this requirement which can vary slightly but is typically from 3 to 6 months' worth and federally regulated.

1st Year's Insurance	$600		You typically pay the first year's home owners' insurance premium at closing.

Pro-Rated Property Tax	-$740		Closing early in the year (before tax bills are out), the seller will pay the buyer for their share of taxes through the closing date. When the bill comes due, the buyer pays it all. If closing after the bill is available, each party will contribute their share and the bill will be paid at time of closing. In this example, the seller pays the buyer for Jan. 1 through May 15 & the buyer will pay the full $2000 bill the following January.
Pro-Rated HOA Fees	$49		HOA fees vary by neighborhood and are usually paid in advance for 6 months or a year. If the seller has already paid them, the buyer reimburses the seller for their share. In this example, the seller had paid $200 for Jan.1 through June 30.

Attorney Based Charges
Attorney's Fee	$450		The fee the attorney charges for work done by them and their staff.
Title Search & Update	$125		Fees to research and verify that clear title to the property can be conveyed to the buyer.
Title Insurance	$300		Calculated based on the price of the home and the amount of the mortgage.
Recoding Fees	$115		Based on the number of pages of deed and mortgage to be recorded.
Couriers, Copies & Misc. Fees	$100		There may be additional fees if a power of attorney is needed or if closing paperwork must be mailed away to buyers who can't attend closing.

Survey	$400		Optional but strongly recommended and may be required by title insurance providers. Large tracts of land will cost substantially more to survey.
Home Inspection	$350		Usually based on the size of the home and will be more if special inspections (such as radon, well or septic) are required.
Pest Inspection	$50		Most lenders will require a pest inspection report on a standard NC form.
Additional Inspections	$0		In rare instances, the home inspector may see something suspicious & recommend that the buyer call in a specialist -- such as a HVAC or roofing contractor or a structural engineer.
HOA transfer fee	$50		The neighborhood's HOA management company typically charges a fee to set up billing for the new home owner. $20 - $200.
Other fees	$0		Every sale is unique. Always allow for a surprise or two in your budget.

= TOTAL COSTS	$6,302

Cash Needed at Closing	$52,302		Add the net selling price plus the total of all closing costs to arrive at the estimated amount the buyer will need to wire to closing or bring as a cashier's check.

Monthly Payments:

Use our Mortgage Calculator to estimate your monthly mortgage payments.

Selling?

In a typical transaction (if there is such a thing), the seller will pay:

- Commissions for both their listing firm and the firm representing the buyer.
- The transfer tax ($2 per $1000 of the selling price; $500 in the above example.)
- Document prep fees to the attorney (around $200.)
- Recording and courier fees related to the pay-off of their mortgage.

If negotiated in the contract, the seller may also pay:
- A portion of the buyers' closing costs.
- Some costs associated with repairs (if allowed by the lender.)
- The cost of a one-year home warranty for the buyer ($400-$600.)

The seller will receive a check after the sale is recorded for the purchase price less their share of costs and less the pay-off of any mortgages attached to the property.