| What Are Closing Costs? When selling your
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| | This fee covers the cost of a credit
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| home "For Sale by Owner" (aka FSBO), your
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| | report, which shows your credit history.
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| lender usually prepares a "Good Faith
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| | The lender uses the information in a
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| Estimate" of closing costs. You are
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| | credit report to help decide whether or
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| entitled to receive this estimate no
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| | not to approve your loan and how much
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| later than three business days after you
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| | money to lend you. 7. Lender's Inspection
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| apply for a loan. Because it is an
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| | Fee: This charge covers inspections,
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| estimate of the costs you may incur, it
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| | often of newly constructed housing, made
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| may not contain all potential costs. The
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| | by employees of your lender or by an
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| lender will not know what all of the
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| | outside inspector. 8. Mortgage Insurance
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| costs are going to be. The "Good Faith
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| | Application Fee: This fee covers the
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| Estimate" will be an estimate based on
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| | processing of an application for mortgage
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| previous experience. Actual closing
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| | insurance. 9. Assumption Fee: This is a
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| expenses usually exceed the estimate. To
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| | fee which is charged when a buyer
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| avoid problems, go prepared to pay more
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| | "assumes" or takes over the duty to pay
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| than the amount listed on your estimate.
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| | the seller's existing mortgage loan. 10.
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| If you are comparing two lenders, look
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| | Mortgage Broker Fee: Fees paid to
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| only at the costs charged by the lender.
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| | mortgage brokers would be listed here. A
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| Lenders can only make educated guesses
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| | CLO fee would also be listed here. 11.
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| about the charges made by others. You
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| | Interest: Lenders usually require
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| will receive an itemization of costs you
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| | borrowers to pay the interest that
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| may have to pay when you buy your home.
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| | accrues from the date of settlement to
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| The costs are listed in the order that
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| | the first monthly payment. 12. Mortgage
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| they should appear on a Good Faith
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| | Insurance Premium: The lender may require
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| Estimate you obtain from a mortgage
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| | you to pay your first year's mortgage
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| lender. There are two broad categories of
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| | insurance premium or a lump sum premium
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| closing costs. Non-recurring closing
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| | that covers the life of the loan, in
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| costs are items that are paid once and
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| | advance, at the settlement. 13. Hazard
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| you never pay again such as loan
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| | Insurance Premium: Hazard insurance
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| origination fees, recording fees, survey
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| | protects you and the lender against loss
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| fees, etc. Recurring closing costs are
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| | due to fire, windstorm, and natural
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| items you pay again over the course of
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| | hazards. Lenders often require the
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| home ownership, such as property taxes
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| | borrower to bring to the settlement a
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| and homeowner's insurance. Closing costs
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| | paid-up first year's policy or to pay for
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| are usually made up of the following: 1.
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| | the first year's premium at settlement.
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| Attorney's or escrow fees (yours and your
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| | 14. Flood Insurance: If the lender
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| lender's if applicable) 2. Property taxes
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| | requires flood insurance, it is usually
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| (to cover tax period to date) 3. Interest
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| | listed here. 15. Title Charges: Title
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| (paid from date of closing to 30 days
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| | charges may cover a variety of services
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| before first monthly payment) 4. Loan
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| | performed by title companies and others.
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| origination fee (covers lender's
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| | Your particular settlement may not
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| administrative costs) 5. Recording fees
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| | include all of the items below or may
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| 6. Survey fee 7. First premium of
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| | include others not listed. 16. Settlement
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| mortgage insurance (if applicable) 8.
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| | or Closing Fee: This fee is paid to the
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| Title insurance (yours and your lender's)
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| | settlement agent or escrow holder.
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| 9. Loan discount points 10. First payment
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| | Responsibility for payment of this fee
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| to escrow account for future real estate
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| | should be negotiated between the seller
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| taxes and insurance 11. Paid receipt for
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| | and the buyer. 17. Abstract of Title
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| homeowner's insurance policy (and fire
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| | Search, Title Examination, Title
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| and flood insurance if applicable) 12.
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| | Insurance Binder: The charges on these
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| Any documentation preparation fees. On
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| | lines cover the costs of the title search
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| closing day, you'll present your paid
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| | and examination. 18. Document
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| homeowner's insurance policy or a binder
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| | Preparation: This is a separate fee that
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| and receipt showing that the premium has
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| | some lenders or title companies charge to
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| been paid. The closing agent will then
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| | cover their costs of preparation of final
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| list the money you owe the seller
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| | legal papers, such as a mortgage, deed of
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| (remainder of down payment, prepaid
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| | trust, note or deed. 19. Notary Fee: This
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| taxes, etc.) and then the money the
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| | fee is charged for the cost of having a
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| seller owes you (unpaid taxes and prepaid
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| | person who is licensed as a notary public
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| rent, if applicable). The seller will
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| | swear to the fact that the persons named
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| provide proofs of any inspection,
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| | in the documents did, in fact, sign them.
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| warranties, etc. Once you're sure you
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| | 20. Attorney's Fees: You may be required
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| understand all the documentation, you'll
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| | to pay for legal services provided to the
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| sign the mortgage, agreeing that if you
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| | lender, such as an examination of the
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| don't make payments the lender is
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| | title binder. Occasionally, the seller
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| entitled to sell your property and apply
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| | will agree in the agreement of sale to
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| the sale price against the amount you owe
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| | pay part of this fee. The cost of your
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| plus expenses. You'll also sign a
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| | attorney and/or the seller's attorney may
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| mortgage note, promising to repay the
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| | also appear here. If an attorney's
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| loan. The seller will give you the title
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| | involvement is required by the lender.
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| to the house in the form of a signed
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| | 21. Title Insurance: The total cost of
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| deed. You'll pay the lender's agent all
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| | owner's and lender's title insurance is
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| closing costs and, in turn, he or she
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| | shown here. 22. Lender's Title Insurance:
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| will provide you with a settlement
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| | The cost of the lender's policy is shown
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| statement of all the items for which you
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| | here. 23. Government Recording and
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| have paid. The deed and mortgage will
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| | Transfer Charges: These fees may be paid
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| then be recorded in the state Registry of
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| | by you or by the seller, depending upon
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| Deeds, and you will be a homeowner. At
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| | your agreement of sale with the seller.
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| closing, you will get: 1. Settlement
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| | The buyer usually pays the fees for
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| Statement 2. HUD-1 Form (itemizes
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| | legally recording the new deed and
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| services provided and the fees charged;
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| | mortgage (line 1201). Transfer taxes,
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| it is filled out by the closing agent and
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| | which in some localities are collected
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| must be given to you at or before
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| | whenever property changes hands or a
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| closing) 3. Truth-in-Lending Statement 4.
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| | mortgage loan is made, can be quite large
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| Mortgage Note 5. Mortgage or Deed of
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| | and are set by state and/or local
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| Trust 6. Binding Sales Contract (prepared
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| | governments. City, county and/or state
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| by the seller; your lawyer should review
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| | tax stamps may have to be purchased as
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| it) 7. Keys to your new home Your
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| | well 24. Survey: The lender may require
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| Settlement Costs are going to consist of
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| | that a surveyor conduct a property
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| the following: 1. Sales/Broker's
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| | survey. This is a protection to the buyer
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| Commission: This is the total dollar
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| | as well. Usually the buyer pays the
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| amount of the real estate broker's sales
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| | surveyor's fee, but sometimes this may be
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| commission, which is usually paid by the
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| | paid by the seller. 25. Pest and Other
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| seller. This commission is typically a
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| | Inspections: This fee is to cover
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| percentage of the selling price of the
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| | inspections for termites or other pest
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| home. 2. Items Payable in Connection with
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| | infestation of your home. 26. Lead-Based
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| Loan: These are the fees that lenders
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| | Paint Inspections: This fee is to cover
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| charge to process, approve and make the
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| | inspections or evaluations for lead-based
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| mortgage loan. 3. Loan Origination: This
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| | paint hazard risk assessments. 27. Total
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| fee is usually known as a loan
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| | Settlement Charges: The sum of all fees
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| origination fee but sometimes is called a
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| | in the borrower's column entitled "Paid
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| "point" or "points." It covers the
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| | from Borrower's Funds at Settlement" is
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| lender's administrative costs in
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| | placed here. This figure is then
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| processing the loan. Often expressed as a
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| | transferred to line 103 of Section J,
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| percentage of the loan, the fee will vary
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| | "Settlement charges to borrower" in the
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| among lenders. Generally, the buyer pays
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| | Summary of Borrower's Transaction on page
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| the fee, unless otherwise negotiated. 4.
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| | 1 of the HUD-1 Settlement Statement and
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| Loan Discount: Also often called "points"
| |
| | added to the purchase price. The sum of
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| or "discount points," a loan discount is
| |
| | all of the settlement fees paid by the
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| a one-time charge imposed by the lender
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| | seller are transferred to line 502 of
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| or broker to lower the rate at which the
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| | Section K, Summary of Seller's
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| lender or broker would otherwise offer
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| | Transaction on page 1 of the HUD-1
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| the loan to you. Each "point" is equal to
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| | Settlement Statement. Don't be
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| one percent of the mortgage amount. For
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| | overwhelmed by all of the fees and
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| example, if a lender charges two points
| |
| | charges. Your closing agent will go over
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| on a $80,000 loan this amounts to a
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| | each item one line at a time.
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| charge of $1,600. 5. Appraisal Fee: This
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| | The author, Kyle Soper, is the website
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| charge pays for an appraisal report made
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| | Manager of Virtual FSBO ( a FSBO website
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| by an appraiser. 6. Credit Report Fee:
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| | created in 1999.
|
