How to Use a Mortgage Closing Cost Calculator

By Arvin Sahakian · Jan 13, 2016 · Mortgage

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Image courtesy of Flickr, www.SeniorLiving.Org

In this article, we're going to teach you how to use our BeSmartee Mortgage Closing Cost Calculator. You will use this calculator to estimate detailed closing costs for a mortgage loan.

Knowing your closing costs are an important part of shopping for a mortgage. Although some lenders or brokers may offer you rock bottom rates to compete with others, they may be charging you thousands of dollars in order to achieve that rock bottom interest rate. It's important to find a good balance between the fees you will pay to attain the loan and the interest rate you will pay for borrowing the money.

In this article, we will walk you through our BeSmartee Mortgage Closing Cost Calculator. You can follow the instructions, enter the required information and see a complete and transparent picture of what you should expect to pay in mortgage closing costs.

Using Our Mortgage Closing Cost Calculator

We have created a step-by-step video for how to use the BeSmartee Closing Cost Calculator. Feel free to watch the video or follow our guide below.

Let's begin by clicking on this BeSmartee Closing Cost Calculator link.

After clicking on the link, to the right, you will see a list of all our calculators. To the left you will see space available to enter your Loan Amount. In this example we will assume you are working with a $350,000 loan amount.

Next click on Additional Options. You will see a dropdown for Origination and Broker Fees, these are fees charged by a lender or broker for putting your loan together. These fees can range from 0% to 3% of your loan amount, depending on who you choose to work with and your unique qualifications. We will use 1% as an example, which amounts to 1% of your $350,000 loan amount.

Then you will enter any Discount Points that you may have. Discount points are fees you pay to lower your interest rate further than what you have initially qualified for. Typically a 1% discount fee will lower your annual interest rate by 0.25%. In this example we will assume you will pay 0% for discount points.

After that, you will enter the Interest Rate for which your monthly payments will be based on. This is not to be confused with the APR, which is a different percentage that is calculated by including all of the fees for the loan, represented as an interest rate to allow borrowers to compare loans among lenders. We will use a 4.00% interest rate in this example.

Finally, you will enter your Property Taxes. Property taxes are based on the assessed value of your home which is determined by the county assessor's office. Property taxes can vary between counties and states. In our example we will assume a 1.1% property tax rate, typical for homes in Los Angeles County.

As you can see with $4,400 in lender costs, $3,680 in third party closing costs and $2,977 in settlement charges, your estimated closing cost will total $11,057 for a $350,000 loan.

Lender closing costs are comprised of:

• Origination Fees
• Discount Points
• Administrative/Underwriting Fees
• Document Preparation Fees
• Rate Locking Fees if applicable (fees for locking in an interest rate for more than 30 days)

Third-party closing costs are comprised of:

• Credit Report Fees
• Appraisal Fees
• Courier Fees
• Flood Certification Fees
• Tax Service Fees
• Wire Transfer Fees
• Lender Inspection Fee (used when repairs to a property are required before issuing a loan)
• Recording Fees
• Notary Fees
• Title Insurance
• Escrow Fees

Settlement charges are comprised of:

• Prepaid Interest (a daily interest charge paid depending on the day of the month a loan closes)
• Homeowners Insurance
• Mortgage Insurance if applicable (depends on type of loan and loan to value ratio)
• Property Tax Impounds (1 to 8 month reserves to ensure future property taxes will be paid)

You have just learned how to use the BeSmartee Closing Cost Calculator to estimate your closing costs. If you have any questions, comments or concerns you can reach me at Arvin@BeSmartee.com.

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