Closing Cost Question

I think its loan amount... not purchase price.

The purchase price only affects the seller (to pay taxes).


The only way the purchase price can affect your payments is if you are financing more than 80% of the home's value. Then you pay PMI.

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Posted by skew

please excuse my ignorance, but are closing cost fees based on the purchase price of the home or the loan amount?

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Closing costs are made up of various items. Included in them are legal and other fees paid such as title, etc.. They are neither here nor there with respect to purchase or loan amount.

Another item included is mortgage interest. You will need to pay interest from the date of closing up until the date of your first mortgage payment. This is naturally based on the loan amount and fluctuates based on the date you close and the date you have set to pay your mortgage.

Also included is real estate taxes. The seller most likely has paid real estate taxes for a period that runs past the date of closing so you need to reimburse him for that.

Other costs like this may be utilities such as gas or oil, etc.

There is also a mortgage tax, which I think is .25% of the value of the mortgage.

There's homeowners insurance that is sometimes paid at closing. This is usually a full years worth of coverage.

And of course there are reserves. If you are going to be paying the taxes through a bank's escrow agent (vs. paying them on your own), you will be required to establish a reserve, usually with 6 months worth of taxes. Reserves can also be set up for homeowners ins as well as PMI if any.