Preparing for Closing Costs on Your New Home Loan

Sheryl Landrum
LoanBiz Columnist


A new home loan, purchase, or a refinance comes with a service charge. When looking for a new home mortgage, you can determine how much you can expect to pay by asking for a 'Good Faith Estimate.' If you get an estimate from each lender you work with, you'll be able to compare loan costs between lenders.

• Lender Fee--Lender fees for a home purchase or refinance usually run about $1,000 in California.
• Loan Discount Fee (also known as "points")--Points are paid to reduce the interest rate on the home mortgage loan and are based on increments of 1% of the loan amount. One point on a $400,000 mortgage loan equates to $4,000.
• Appraisal Fee--Appraisal fees generally are determined by the value of the home and run from $300-$1,500, depending on the home's worth.
• Escrow Fee--Escrow fees vary depending on whether it is a new home purchase or a refinance. A $600,000 purchase will generally equate to a $450 escrow fee with a miscellaneous "pad" of $500 to take care of all related escrow fees.
• Title Fees--Title fees are determined by whether the loan is a purchase or a refinance (higher for a purchase). With our $600,000 purchase example, title fees would run approximate $1,000 with another $120 added for recording.
• Homeowner's Insurance--You will need a one-year homeowner's policy for a home purchase and proof of insurance paid for a refinance.
• Impounds--If you have your taxes and insurance fees impounded, be prepared to come in with three to six months' worth of cost for same. However, with a refinance you will be refunded for monies collected, but not used, by your prior lender.

Buying a home or refinancing can be expensive. Knowing what to expect can make your new mortgage transaction a much more pleasing one.

About the Author
Sheryl Landrum is a Senior Loan Officer with First Capital Mortgage in San Diego and Prudential Realty in Bonsall, California.