When you get a mortgage, you will likely be required to pay closing costs at the finalization of your purchase or refinance. These fees are charged by your lender and third parties that have performed services related to your home purchase, such as title search fees, loan origination fees, appraisal fees, etc. Typically, closing costs range from 2 to 5 percent of the purchase price of a home, but when will you know the exact amount to bring to closing?
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Estimated Closing Costs - Loan Estimate
After August 1st, 2015, all loan applications will abide by a new set of loan disclosure rules, called the TILA RESPA Integrated Disclosures (TRID). By these rules, after you apply for a mortgage, your lender is required to send you a loan estimate within 3 business days. This will include an Estimated Cash-to-Close with fee details related to your mortgage loan.
Final Closing Costs - Closing Disclosure
Under the new TRID loan disclosure rules, your lender must provide you with a closing disclosure 3 business days prior to closing (business days do include Saturdays but exclude federal holidays). For example, if your closing is planned for a Monday, your lender must provide you with closing disclosures by the preceding Thursday. This closing disclosure will contain all final closings costs.
Your lender will provide the closing disclosures and confirm receipt via FedEx delivery, e-mail or face-to-face disclosure.
Plan to know your exact closing costs at least 3 business days prior to closing. Be prepared to bring the finalized closing cost amount in the form of a cashier's check or have the funds wired on closing day.
For more information about home buying and financing, download our free Mortgage 101 Handbook, a great resource for first-time homebuyers.