when do you pay closing costs

When Do You Pay Closing Costs?

Closing costs for most mortgages will be anywhere from 2%-5% of the purchase price. The majority of the closing costs are paid on the day you purchase the home, but there are some items that must be paid in advance.

Closing Costs that are Paid Before Closing

The majority of the closing costs are paid the day of your closing. However, there are a few items that will need to be paid a few weeks prior to closing. The are as follows:

Appraisal – Expect to pay for your appraisal via credit card before the appraisal is done. The fee will be anywhere from $350-$500 depending upon your location and size of the home. Multi family homes will cost more. Appraisal fees will not be reimbursed if for some reason you do not purchase the home.

Home Inspection – A home inspection is optional but recommended in most cases. With an FHA loan an inspection is mandatory. You will pay for this when the inspection occurs. The cost of a home inspection is anywhere from $300-$450.

Homeowner’s Insurance – If you are getting a mortgage to help purchase the home, your lender will require you to pay for a homeowner’s insurance policy one year in advance. This will need to be done prior to closing.

Closing Costs that are Paid the Day of Closing

The remainder of the closing costs are paid the day of closing. The list of items below may or may not all apply to you. Your lender can provide you with an estimate immediately after you complete your loan application.

  • Application Fee
  • Underwriting Fee
  • Processing Fee
  • Origination Fee
  • Discount Points
  • Attorney Fee
  • Title Fees
  • Title Insurance
  • Credit Report
  • Flood Certification
  • Survey
  • Wire Fee
  • Courier Fee
  • Recording Fee
  • Tax Escrows
  • Pre-paid Interest

If you would like an estimate of what your closing costs will be, then complete this short form and a loan officer will help you.

When do You Pay Closing Costs For a Refinance?

If you are refinancing, you can have your closing costs rolled into the loan. This means there will be no out of pocket costs at closing other than the appraisal. The appraisal must be paid prior to closing and that usually is done with a credit card. 

If you are refinancing with an FHA streamline refinance, an appraisal is not needed which means you will have no out of pocket costs at all.

When do You Need to have Closing Cost Money in Your Account?

You do not need to have the closing cost money in your bank account the day you apply for your mortgage. However, your lender will provide you with an estimate and will want to know where the funds will come from.

Have a plan ready to discuss how closing costs will be funded whether you are using gift funds, a seller credit or lender paid.