How much should you budget for closing costs?

Per Fanniemae; Closing costs usually range from 2% to 5% of the value of your mortgage and are paid in addition to your down payment click here

There are ways to save on closing cost but before trying to save on it, you need to have a clear understanding of Closing Costs. Per loan Estimate, Closing Costs are divided in TWO different sections. For more detail information please click here

 Loan Costs and other Costs

Loan Cost = Section D=" Section" A+ Section B+ Section C

Section A:  This is your lender Charges, which includes Origination Charges, Underwriting fee , this charge ties up , to offered interest rate, and loan terms, ( like having or not having prepayment Penalty, having or not having balloon payment. ) You can shop this section between different lenders or mortgage brokers.

Section B: This section belongs to Credit Report , Appraisal Report , Flood Certificate and in cases of government loan , it includes upfront Mortgage insurance , which you can NOT even shop for . These are pretty solid fees. If your loan is not government loan , so you do not have to be worried about upfront mortgage insurance.

Section C:This section includes fees like Escrow Fee , Title Fee  , Hazard insurance and any related fees and this section you can shop for.

Other Costs=" Section" I = section E+ Section F+ Section G+ Section H

Section E; This section includes all Taxes and government fees and is not negotiable

Section F: These section belongs to all prepaid fees  like prepaid interest , taxes 

Section G: If you ever decide , for your monthly payment to include Taxes and Insurance. Then the lender needs to create a reserve account for you , which this account is your own money and at any time if you sell, refinance or decide to cancel this money will come back to you 

Section H: This section is owner title policy and totally is an option and not mandatory, but by law , it estimated fee must be disclosed if you ever decide  to have it.

Total Closing Cost=" Loan" Cost+ Other Cost=" Section" D+ Section I = Section J

Section J: Under this section you can see, Lender Credit, which you can negotiate with your loan officer in order to receive lender credit in order to offset part or all your closing cost. Lender credit may contribute with getting higher interest rate.