When it comes to purchasing a million-dollar home in Northern Virginia, understanding the associated closing costs is crucial.
I’m here to simplify this complex topic. Let’s dive into a detailed explanation of typical closing costs and fees involved in such a transaction.
Understanding Closing Costs: A Line-by-Line Breakdown
Using the Good Faith Estimate format, we’ll break down the closing costs into several key categories. These categories include closing costs, prepaids, counting of the entire transaction, and the mortgage payment.
- Loan Origination and Processing Fees: If there’s no origination fee required, it would typically show as zero. However, some lenders impose processing fees. Working with a mortgage broker may eliminate these, though I personally don’t charge a processing fee. Often, an underwriting fee ranging from $750 to $1,200 is standard.
- Appraisal and Credit Report Fees: Appraisal fees range between $500 and $750 depending on factors like location. Similarly, credit report fees are rising, averaging between $110 and $150.
- Tax Service and Flood Certification: These fees monitor your tax payments and identify if your property is in a flood zone. If your home moves into a flood zone, you’ll be required to purchase flood insurance.
- Verification of Employment: Sometimes, obtaining employment verification comes with an added fee if your employer uses a third-party service such as the Work Number.
- Settlement and Title Insurance Fees: Settlement fees in Northern Virginia can range between $495 and $1,200. Lenders’ title insurance is vital to protect against potential property liens.
- Recordation and Tax Stamps: The recording of deeds and mortgages has associated fees. Additionally, state and city tax stamps add $1,586.50 and $47.50 respectively, determined by the state.
- Owner’s Title Insurance Policy: While optional, this protects your interest in the property, countering potential claims against your ownership.
Total Cost Analysis
In Virginia, the closing costs for a million-dollar loan, assuming no down payment, amount to $16,182.52—approximately 1.6% of the purchase price.
Prepaids and Escrow
A crucial component is prepaids, which includes prepaid interest. It’s the only instance when interest is charged upfront, covering the period from purchase to month-end. Additionally, a one-year home insurance policy, estimated at $2,700, must be in place by closing. Starting an escrow account ensures timely tax and insurance payments.
Comprehensive Cost Overview
Combining all these factors, the closing costs and prepaids add up to $21,144, which equates to about 2.3% of the purchase price. Including the $100,000 down payment, you’ll need approximately $1,023,144 at closing.
Estimated Mortgage Payments
With a $900,000 loan at a 6.875% interest rate and a 780 credit score, expect a monthly principal and interest payment of $5,912. Adding insurance, taxes, and mortgage insurance, your total monthly obligation rounds up to $7,200.86.
Summary
Navigating the closing costs for a million-dollar home can seem daunting, but breaking them down into a line-by-line analysis helps demystify the process. It’s essential to have detailed conversations with your loan officer to ensure you’re comfortable with all aspects, from closing costs to monthly payments. For live mortgage rates click here.