| Know in Advance
What to Expect |
| Below
is an overview of the types of closing costs you may incur
on your loan. Some are one-time fees while others reoccur
over the life of the loan. When you apply for your loan, you
will receive a Good Faith Estimate of Settlement Charges and
a booklet that will explain these costs in detail. |
| |
 |
| |
Loan
Origination Fee: This fee covers the lender’s
administrative costs in processing the loan. A one-time fee
often expressed as a percentage of the loan. The origination
fee is typically 1% of the loan, but remember, you can obtain
a loan with no origination fee and a slightly higher interest
rate. Loan Discount: Often called "points", a loan
discount is a one-time charge used to adjust the yield on
the loan to what market conditions demand. One point is equal
to 1% of the loan amount. This fee is rare since interest
rates are so low. |
| |
|
| |
Appraisal
Fee: This is a one-time fee that pays for an appraisal-
a statement of property value for the lender. The appraisal
is made by an independent fee appraiser and can cost a standard
$325 to $450 or much more depending on the home’s size
and location.
Credit Report Fee: This one-time fee covers the cost of the
credit report that is run by an independent credit reporting
agency and is usually about $90. |
| |
|
| |
Title
Insurance Fees: There are two title policies: a lender’s
title policy (which protects the lender against loss due to
defects on title) and a buyer’s title policy (which protects
you). These are both one-time charges, but the one you usually
pay for as buyer is usually between $325.00, and $575.00. |
| |
|
| |
Miscellaneous
Title Charges: The title company may charge fees for
a title search, title examination, document preparation, notary
fees, recording fees, and a settlement or closing fee. These
are all one-time charges and add up to about $200. |
| |
|
| |
Document
Preparation Fee: There may be a separate, one-time
fee that covers preparation of the final legal papers, including
the note and deed of trust. These legal documents run about
$150. |
| |
|
| |
Lender
Fees: Other lender fees include a underwriting fee,
a flood certification fee, an amortization schedule fee, and
other miscellaneous fees that should be disclosed by your
mortgage lender at loan application. These fees vary dramatically
from about $450 to $900. |
| |
|
| |
Prepaid
Interest: Depending on the time of month your loan
closes, this charge may vary from a full month’s interest
to just a few day’s interest. If your loan closes at
the beginning of the month, you will probably have to pay
the maximum amount. If your loan closes at the end of the
month, you will only have to pay a few day’s interest. |
| |
|
| |
PMI
Premium: Depending on the amount of your down payment,
you may be required to pay an up front fee for mortgage insurance
(which protects the lender against loss due to foreclosure).
You may also be required to put a certain amount for PMI into
a special reserve account (an impound account) held by the
lender. |
| |
|
| |
Beginning
of the escrow account: Your lender will typically have
an account where your property taxes and property insurance
will be held. This account will be started with approximate
taxes equal to two months in excess of the number of months
that have elapsed this year. (If 6 months have passed, they
will collect 8 months of taxes.) Your property insurance will
be collected one year in advance plus two months worth into
your escrow account. |
