Buying a house is exciting, stressful and fulfilling. But it isn't inexpensive. In addition to your home's purchase price, you'll also have to pay closing costs, the fees that your mortgage lender and third-party service providers charge for originating and closing your mortgage loan. These closing costs can be high. Bankrate.com, in its 2012 survey of closing costs, reported that homeowners closing a $200,000 mortgage loan could expect to pay an average of $3,754 in closing costs. In some parts of the country, these costs are even higher. In New York, the state that Bankrate.com found had the highest closing costs, buyers paid an average of $5,435 to close a mortgage loan.
Origination and Application Fees
Most lenders charge a loan origination fee to cover the costs it incurs when underwriting your loan. During the underwriting process, your lender will analyze your monthly income and debts to determine whether you can afford your monthly mortgage payments. This fee can vary from lender to lender, says the Federal Reserve Board. But you can expect to pay about $2,734 if you put 5 percent down on your home purchase; $2,537 if you put 10 percent down. Your lender might also charge an application fee. This fee varies, too, but the Federal Reserve estimates that as of February 2013, you'll pay from $65 to $640 for this service, which covers the initial costs of preparing your loan documents and gathering your financial paperwork.
A title insurance company will search your new home's property records to make sure no liens have been filed against it. A bank, for instance, might have a lien filed against your home if previous owners had failed to make their mortgage payments. The bank that has the lien can attempt to take possession of the house, even if you were in no way involved in the missed mortgage payments. That's why a title search is important; it makes sure that your new home is free of any liens or problems. A title search, though, is not free. Quicken Loans reports that you can expect to pay from $150 to $400 for one, as of February 2013.
Title insurance shouldn't be confused with a title search. Title insurance actually protects your mortgage lender in case the title search performed on your property contains any errors. If a lien or other problem later surfaces, the title insurance policy protects your lender up to the amount it is has invested in the property. Even though title insurance doesn't offer you any protection, it will cost you. These fees vary, but the Federal Reserve estimates that as of February 2013, you'll pay from $175 to $900 for title insurance, depending on where you live.
State and Local Government Fees
When you close a mortgage loan, your state or local government might want some cash, too. Usually, these dollars will come in the form of transfer and recording fees. These fees cover the costs that your local and state governments incur when recording the transfer of a house to your name and filing property records with your local recorder's office. These fees can actually add a significant cost to the closing of your loan. Again, though, it depends on where you live. As the Federal Reserve says, in some parts of the United States, transfer and recording fees are minimal. In other parts, though, these fees can rise as high as 3 percent of your total loan amount, as of February 2013. For a loan of $200,000, transfer and recording fees of 3 percent would equal $6,000.
Appraisal and Inspection Fees
You might have to pay other fees that will add to the final cost of purchasing a home; two main ones are the appraisal and inspection fees. When you make an offer on a home and the seller accepts, your lender will send a real estate appraiser to the property to determine its current market value. That's because your lender doesn't want to loan more money than what your new home is worth. This fee varies, but the Federal Reserve estimates that as of February 2013, it will cost you from $263 to $444, depending on your home and its location. Your mortgage lender might also require you to pay for a termite inspection or structural inspection -- or both -- of your new home. You might also have to pay for a septic system test or a water-quality test. The cost of these tests vary, but will run about $300 to $500, according to the Federal Reserve Board, as of February 2013.
Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.