How to figure out closing costs on a mortgage

Closing costs are a factor you must account for consider when taking out a mortgage to buy or refinance a home. Here’s what you need to know across the board…

When can you take out a mortgage there’s fees that you’re going to pay to various service providers besides just the mortgage company. This includes, but is not limited to:

  • Lender fee
  • Title fee
  • Escrow fee
  • County recording fee
  • Notary fee
  • Appraiser fee
  • Pest inspector fee
  • Home inspector fee
  • Insurance provider fee

Closing costs are comprised of both non-reoccurring and reoccurring closing costs. Non-reoccurring closing costs are the one time fees that you pay when you mortgage a home such as lender origination, appraisal, title, notary, doc prep, every fee paid just one time in conjunction with completing the transaction. Re-occurring closing costs include interest, insurance, taxes which are normal carrying costs associated with owning real estate.

Total closing costs versus real closing costs. Total closing costs include all reoccurring and nonrecurring closing costs. Real closing costs are the non-reoccurring closing costs that you pay one time to take out a mortgage. Real closing costs is your cost to borrow the money.

Following scenarios are assuming a no points loan. Points are nothing more than upfront overhead you can use to purchase a lower rate of interest and subsequently a lower monthly payment.

Here is closing costs and how they relate to purchase price:

  • Purchase price $200k-$300k closing costs $7-8k
  • Purchase price $300k-$400k closing costs $9-10k
  • Purchase price $400k to $500k closing costs $10-$11k
  • Purchase price $500-$600k closing costs $11-$12k
  • Purchase price $600-$700k closing costs $12-$13k
  • Purchase price $700k-$800k closing costs $13k-$14k
  • Purchase price $800-$1 million closing costs $15K-$16k

Note to all of these scenarios account for setting up for an impound account for property taxes and insurance and is reflective of total closing costs including both re-occuring and non-reoccuring closing costs.

Refinancing contains lower fees and one form of title insurance is needed, a lender’s policy.

Following is closing costs for no points refinancing:

  • Loan amount $100k-$400k $3k range
  • Loan amounts $400-$600k $3,500 range
  • Loan amounts $600k-$1 million 1,000,000 $4k range

These scenarios are meant to provide a baseline for your home project. These refinance figures are also reflective real closing costs only, thus not accounting for any prepaid taxes or insurance.

If you’re planning to purchase a home or refinance one you already own be prepared for the fees.

Closing costs can be financed, paid for in cash or can come in the form of a gift. Additionally, these can come in the form of the seller credit when buying a home.

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When buying a home, it’s natural to want the lowest mortgage rate possible. But sometimes, chasing a slightly better rate from another lender—especially after your offer has already been accepted—can backfire in a big way. Let’s walk through a real-world scenario. You’ve got an offer accepted on a house. You’re working with a lender who has you approved, documents in underwriting, and a 21-day close of escrow in place. Everything is moving forward. Then you hear from another lender offering a rate that’s 0.25% lower, with slightly better closing costs. It’s tempting. But before you make a jump, here’s what you need to consider. Switching Lenders Comes with Time Costs When you pivot to a new lender mid-contract, they’ll need to: Re-underwrite your entire loan, Order a new appraisal, Disclose and sign new loan documents, Submit the file for final loan approval, Schedule and fund closing—all over again. This doesn’t happen overnight. Even in ideal circumstances, the new lender is likely going to need at least 25–30 days to close. If you’re in a fast-moving or competitive market, this is a real problem. Most sellers won’t grant a contract extension just because you’re switching lenders. So, what happens next? A Contract Extension Can Jeopardize Your Deal Asking for a contract extension means the seller must agree to delay closing. But that delay introduces risk—especially if the seller has backup offers or simply wants certainty. They may not grant the extension. Or worse, they could cancel the deal outright and take another buyer’s offer. Even if the seller agrees to extend, your earnest money and negotiation power could take a hit. And for what? A slightly lower rate that might save you $50 to $75 a month? Mortgage Rates Aren’t as Far Apart as You Think Here’s the truth: all mortgage lenders get their money from the same place—the bond market. The pricing differences between lenders usually range from 0.125% to 0.25% in rate on any given day. If one lender seems to be offering dramatically better pricing, the first thing you should ask is: How? Head over to FreddieMac.com and check the average 30-year fixed rate posted weekly. This is one of the most reliable benchmarks for where rates truly stand in the market. If a lender is quoting you a rate that’s well below that average, ask for the details: Are they charging extra points? Is this a teaser rate with a prepayment penalty? Is it based on a different loan product or risky structure? Often, what sounds “too good to be true”… is. Consider the Bigger Picture Think long-term. If you’re financing $600,000, a 0.25% lower rate may reduce your payment by roughly $75/month. But what if you lose the house and have to start over? That monthly savings doesn’t mean much if you’re outbid on your dream home or lose your deposit. Also, remember: you’re not going to keep this rate forever. Today’s homebuyers typically refinance when rates drop by about 0.75% or more. So if rates fall within the next year or two, you’ll likely be refinancing anyway. Instead of paying extra points now or risking the entire deal for a minor monthly savings, it may be better to accept a slightly higher rate—knowing you’ll refinance when the time is right. The Real Risk Isn’t the Rate—It’s the Delay When shopping for a home loan, don’t just ask, “What’s your rate?” Ask: Can you close on time? Is this rate sustainable or based on hidden costs? Will switching lenders delay or jeopardize my contract? A home purchase contract is a binding agreement between you and the seller to perform within a set timeframe. If you can’t meet those dates because you're chasing a slightly better rate elsewhere, you may want to reconsider if now is the right time to buy. Final Thoughts Yes, interest rates matter. But execution matters more. Before making a switch mid-transaction, talk to your lender. Have an honest conversation about pricing, timelines, and strategy. You might find that staying the course, securing the house, and planning to refinance later offers a better path to financial security. Want to Know Your Options? Let’s compare rates and strategies the smart way—without risking your dream home. 👉 Click here to get a custom rate quote today.

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