Closing Costs
Upon loan closing, buyers are required to pay their down payment and other various closing costs and fees. Most of the closing fees are paid by the buyer, but can be negotiated, some of the fees are prorated, by date, to the seller and the buyer,
By federal law, the credit report fee is the only fee that can be collected at the time of application. The appraisal fee cannot be collected until the Lender’s Estimate has been received by the buyer and the lender is notified that they have chosen to proceed with the application.
While certain fees vary from lender to lender, buyers can expect taxes, appraisals, credit reports, and title insurance to be comparable across the board.
Common closing costs and fees include:
Loan Origination Fee: A percentage of the mortgage (generally 1%), charged to set up and evaluate the loan application. This fee is a revenue item for the lender and/or broker. This fee is common for non-qualified mortgages that do not conform to the underwriting guidelines of the secondary market.
Credit Report Fee: Requested by the lender in order to check your credit to evaluate your loan application.
Appraisal Fee: Used to obtain an independent appraisal of the subject property and determine its value.
Property Taxes: Buyers are responsible for these from the date of closing until the end of that year while sellers are responsible from the first day of the year until the date of closing.
Survey Fee: Verifies the legal position of the home on the subject property and ensures that there are no encroachments or setback violations on the subject property.
Title Search Fee: A detailed search of the historical records related to a property to ensure that the seller is legal owner, that there are no liens, restrictive covenants, outstanding judgments or other claims against the property.
Title Insurance: Often required by the lender for protection against hidden title defects; a lender’s policy only protects the lender – a buyer may also opt to purchase an owner’s title insurance policy.
Discount Points: An optional fee paid upfront to reduce the interest rate paid on the loan.
Recording or Transfer Fees: A small fee charged to cover the paperwork to record the home purchase and transfer ownership.
Interim Interest: Interest from the closing date to the end of the month generally charged to the buyer.
Property Taxes: Buyer’s prorated portion of state and local government property taxes already paid by the seller (such as annually paid taxes).
Escrow Account Payments: Typically required by lenders when borrowers have less than a 20% down payment on Conventional mortgage loans, these payments set aside funds for the upcoming payments of property taxes, the hazard/windstorm insurance annual premium, the flood insurance annual premium (if applicable), the monthly private mortgage insurance premium on conventional loans with less than 20% down, and the monthly mortgage insurance premium for FHA loans.