Mortgage Closing Costs

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 Breakdown of Closing Costs

​​I like to break down closing costs into 3 buckets: Lender Fees, Title/Escrow Expenses and Pre-paid costs. Some costs fall outside these categories like recording and attorney fees but this should help you make sense of what can be an overwhelming subject.

Lender Fees: We charge a processing fee ($495)  plus an underwriting fee of $895 for a total of $1,390. These fees are in line with industry prices. These fees fall into the Origination Fee Bucket by category but are not to be confused with "points" or origination fees. We do not price our loans with origination fees although a similar cost known as a discount fee is available if you choose to "buy down" your rate below market par (no cost) loans. 

Title/Escrow: This bucket of fees generally includes an Escrow fee, Lenders Title Insurance and an Owners Insurance Policy along with other miscellaneous fees.  

Pre-Paid Costs: Pre-paids include mortgage interest, property taxes and hazard insurance.

Impounds of property taxes and hazard insurance may be required or chosen by the borrower.  Impounds can be thought of as a savings cushion held by the servicing bank. The borrower is typically required to "deposit" or pay 3 months of property taxes and hazard insurance.

Hazard Insurance on Purchase Transactions: 1 yr of hazard insurance is required to be prepaid in addition to the 3 mos deposited in escrow.

Propety Taxes on Purchase Transactions: The seller is responsible for property taxes up until the day of closing and the amount will be credited to you at closing. If impounds are chosen, the amount will be credited to your impound account along with your required 3 months. If impounds are not chosen or required, the credit will reduce your cash to close.

Any additional questions, please contact me! 

Mortgage Closing Costs

Disclosures and Closing Costs Explained

Complicated stuff Simplified for you!

Closing depend on the area you live and the type of loan you choose. Below are a list of sample fees that you may see. 

Application Fee: This fee covers the cost for the lender to process your application. Before submitting an application, ask your lender what this fee covers. It can often include things like a credit check for your credit score or appraisal as well. Not all lenders charge an application fee, and it can often be negotiated.

Appraisal: This is paid to the appraisal company to confirm the fair market value of the home.

Attorney Fee: This pays for an attorney to review the closing documents on behalf of the buyer or the lender. This is not required in all states.

Closing Fee or Escrow Fee: This is paid to the title company, escrow company or attorney for conducting the closing. The title company or escrow oversees the closing as an independent party in your home purchase. Some states require a real estate attorney be present at every closing.

Courier Fee: This covers the cost of transporting documents to complete the loan transaction as quickly as possible.

Credit Report: A Tri-merge credit report is pulled to get your credit history and score. Your credit score plays a big role in determining the interest rate you’ll get on your loan.

Discount Fees:  (also known as points) are fees that a borrower can choose to pay in exchange for a lower rate. The cost depends by lender and are based on market conditions. For example: One point equals 1% of the loan amount and can possibly reduce the par (no origination/discount cost) rate by one-eighth to one one-quarter of a percent. Discount points are tax deductible only for the year in which they were paid.

Escrow Deposit for Property Taxes & Mortgage Insurance: Often you are asked to put down two months of property tax and mortgage insurance payments at closing.

FHA Up-Front Mortgage Insurance Premium (UPMIP): If you have an FHA loan, you’ll be required to pay the UPMIP of 1.75% of the base loan amount. You are also able to roll this into the cost of the loan if you prefer.

Flood Determinationor Life of Loan Coverage: This is paid to a third party to determine if the property is located in a flood zone. If the property is found to be located within a flood zone, you will need to buy flood insurance. The insurance, of course, is paid separately.

Home Inspection: You will likely get your own home inspection to verify the condition of a property and to check for home repairs that may be needed before closing.

Home Owners Association Transfer Fees: The Seller will pay for this transfer which will show that the dues are paid current, what the dues are, a copy of the association financial statements, minutes and notices.  The buyer should review these documents to determine if the Association has enough reserves in place to avert future special assessments, check to see if there are special assessments, legal action, or any other items that might be of concern.  Also included will be Association by-laws, rules and regulations and CC & Rs.

Homeowners’ Hazard Insurance: This covers possible damages to your home. Your first year’s insurance is often paid at closing.

Lender’s Policy Title Insurance: This is insurance to assure the lender that you own the home and the lender’s mortgage is a valid lien, and it protects the lender if there is a problem with the title. Similar to the title search, but always a separate line item.

Lead-Based Paint Inspection:
Covers the cost of evaluating lead-based paint risk.

Loan Discount Points:
“Points” are prepaid interest. One point is one percent of your loan amount. This is a lump sum payment that lowers your monthly payment for the life of your loan.

Mortgage Interest: This cost is calculated by multiplying the daily interest cost by the remainder of days in the month from the closing date. For example: if you close on the 15th of the month, you would be responsible for 15 days of mortgage interest at closing in a 30 day calendar month.

Owner’s Policy Title Insurance:
 This is an insurance policy that protects you in the event someone challenges your ownership of the home. It is usually optional.

Origination Fee: This covers the lender’s administrative costs. It’s usually about 1 percent of the total loan but you can sometimes find mortgages with no origination fee.

Pest Inspection: 
This fee covers the cost to inspect for termites or dry rot, which is required in some states and required for government loans.  Repairs can get expensive if evidence of termites, dry rot or other wood damage is found.

Prepaid Interest: Most lenders will ask you to prepay any interest that will accrue between closing and the date of your first mortgage payment.

Private Mortgage Insurance (PMI): If you’re making a down payment that’s less than 20% of the home’s purchase price, chances are you’ll be required to pay PMI. If so, you may need to pay the first month’s PMI payment at closing.

Property Tax: Typically, lenders will want any taxes due within 60 days of purchase by the loan servicer to be paid at closing.

Recording Fees: A fee charged by your local recording office, usually city or county, for the recording of public land records.

Survey Fee: This fee goes to a survey company to verify all property lines and things like shared fences on the property.  This is not required in all states.

Title Company Title Search or Exam Fee:
This fee is paid to the title company for doing a thorough search of the property’s records. The title company researches the deed to your new home, ensuring that no one else has a claim to the property.

Transfer Taxes: This is the tax paid when the title passes from seller to buyer.

Underwriting Fee:
This also goes to your lender, covering the cost of researching whether or not to approve you for the loan.

VA Funding Fee: If you have a VA loan, you may be required to pay a VA funding fee at closing (or you can roll this fee into the cost of the loan if you prefer). This is a percentage of the loan amount that the VA assesses to fund the VA home loan program, however some borrowers are exempt from this fee. The percentage depends on your type of service and the amount of your down payment.

source: Zillow
Disclosures and Closing Costs Explained