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Closing costs: What are they and how are they estimated?

Survey and appraisal fees. These fees will help you to confirm the fair market value of your property. While the cost of these fees varies, they typically a few hundred dollars.

Private mortgage insurance (PMI). You will likely need private mortgage insurance if your down payment is less than 20%. This type of insurance protects the lender in case you cannot afford to repay your loan.

Escrow deposit. Usually between 1% and 2% of the sale price, this deposit goes to the agent who helped you close the deal. The amount of money you spend here will vary based on the location of your property and the escrow company you go with.

Attorney fees. In certain areas, you are required by law to have an attorney throughout this process. Attorney fees can be paid as a flat fee separately or included in your closing cost.

Because the closing costs run between 2% and 6% of the loan, you could pay anywhere from $6,000 to $15,000 on a $300,000 loan, above and beyond the down payment. The best way to pay for those closing costs is as a one-time, out-of-pocket expense. If your lender okays it, you could finance those costs by including them in your loan. However, you will have to pay interest on it throughout the life of the loan. 

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