When you get a mortgage, you almost certainly will pay closing costs upon finalizing your purchase or refinance. These are fees 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 and other similar charges. Typically, closing costs range from 1 to 5 percent of the purchase price of a home. Maybe you’re asking, “When will I know the exact amount to bring to closing?”
Estimated Closing Costs – Loan Estimate
Since 2015, all loan applications conform to a new set of loan disclosure rules, known as TRID (from “Truth in Lending Act”—T—”Real Estate Settlement Procedures Act”—R—and “integrated disclosures”—ID). In accordance with TRID, we at Compass Mortgage (and all other lenders) are required to send you a loan estimate within three (3) business days after you apply for a mortgage loan. This loan estimate will include “Estimated Cash-to-Close” with details regarding the fees related to your mortgage loan.
Final Closing Costs – Closing Disclosure
Under TRID loan disclosure rules, Compass Mortgage—or any lender—must also provide you with a closing disclosure three business days prior to closing (business days do include Saturdays, but exclude federal holidays). For example, if your closing is planned for a Monday, we must provide you with closing disclosures by the preceding Thursday. This closing disclosure will contain all final closing costs.
Compass Mortgage will provide the closing disclosures and a confirmation of receipt via FedEx delivery, e-mail or face-to-face disclosure.
Plan to know your exact closing costs a minimum of three 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.
It is important to note that in some mortgage loans, there is an option to include closing costs in the loan thus adding to the total of your monthly loan payment. However, closing costs paid in this way will accrue interest.
For more information about home buying and financing, download our free Mortgage 101 Handbook, a great resource for first-time homebuyers.