How Much are Closing Costs?

• Closing costs do not involve a flat or set fee. The actual amount paid by buyers vary depending on the mortgage loan and the cost of certain services. On average, you can anticipate paying a minimum of 3 percent on your closing costs or settlement fees. This number can increase if you live in an area with higher taxes and can possibly cap at 5 or 6 percent, according to the Federal Reserve.
  
  

What are Closing Costs?

• Closing costs are paid to your home loan lender, and this payment covers mortgage-related fees that were necessary to complete the home loan process. For example, the majority of lenders or brokers charge a loan origination fee that is 1 percent of the mortgage loan. Plus, there are fees paid to an attorney and the title company. If negotiating a lower interest rate on the mortgage loan, you may opt to pay mortgage discount points, which can greatly increase your closing costs.
  
  

Ways to Reduce Closing Cost

• Closing costs are negotiable, and, if you don't have the extra money to cover the entire expense, inform your lender to strike a deal. To make closing costs more affordable, lenders or brokers may decide to reduce or eliminate the loan origination fee. On a $200,00 mortgage loan, you could possibly save $2,000 on your closing costs. What's more, you can choose not to purchase mortgage discount points and take a higher mortgage interest rate. Every discount point costs 1 percent of the mortgage balance, and some buyers buy three or four points to help bring down their mortgage interest rate.
  
  

Other Closing Costs Option

• Other options exist to assist you with paying your closing costs. Sellers, especially motivated sellers, may offer or agree to pay your closing costs (or a portion of the fee) to acquire a quick sale. Mortgage lenders offer provisions where they include the closing costs in the mortgage balance, which can alleviate any out-of-pocket expenses.