Home Buying 101- Closing Costs

Purchasing a house requires knowledge. In addition to the down payment required on most loans, you will be faced with paying closing costs. Do you understand how closing costs are figured on a home mortgage? This article fromĀ Boulevard 88 Singapore will discuss the normal closing costs associated with a home mortgage as well as whether the item is charged to the buyer or the seller at the time of closing. You will also read about how you can negotiate with the seller to pay some or all of the closing costs.

Prepaid Items

Prepaid items are things that must be paid for before the closing takes place. Many lenders now ask for you to establish a savings account, or escrow account, at the time of application. The lender will ask that you place a predetermined amount of money into the account each time you get paid. This money will be used to pay for your homeowner’s insurance policy and prorated property taxes. Once the closing has happened, this account will then be zeroed out and closed or kept open. If the account is kept opened, a portion of your payment will be placed in escrow each month to pay for your property taxes and homeowner’s insurance premiums. When the bill comes due, the lender will pull the money from escrow to pay it.


Points are simply interest you pay at the time of closing. The points paid help you get a lower interest rate. For example, a loan with 5 percent interest and no points is offered to you and a loan with 4 percent interest is offered to you with 2 points due at closing. This means that 2 percent of the purchase price will be due at closing. Most people prefer loans with no points; however, if you have a large amount of money for a down payment, you may want to consider paying points and going with the lower interest rate, which over the life of the loan will save you money.

Closing Costs

There are many closing costs associated with obtaining a mortgage. For example, the purchaser is responsible for paying for the survey, the appraisal, their portion of the property taxes and a homeowner’s insurance policy. Many loans also have loan application costs which include the cost of a credit report, processing fees and loan origination fees. The amount of money needed for the mortgage varies; however, you can expect to pay up to 7 percent of the purchase price in closing costs.

There are ways to lower the amount of closing costs that you are required to pay. You can negotiate with the seller to pay for the closing costs out of his loan proceeds or you can ask the mortgage lender to pay a portion of your closing costs. Most lenders do not allow you to borrow the money to pay for closing costs.

Did you learn anything from this article about closing costs? Do you now feel comfortable enough to see if the seller will help pay for the closing costs? After reading this article, you should have an understanding of the costs associated with obtaining a home mortgage.