|Every home loan has associated closing costs, which are fees that are associated with home financing but are not part of your actual mortgage. Closing costs cover items such as title search, attorney’s fees, origination fees, discount points, prepayment of taxes and insurance (escrow) and real estate transfer taxes. The names of the fees can vary from state to state and a few don’t apply everywhere, but in general the same costs are charged across the country.
Your closing costs usually range anywhere between 3% and 10% of your total loan amount. Usually you can roll the costs into the loan, although a few must be paid at closing by check, such as the origination fee.
Your closing costs will include the following fees:
Title Insurance — Based on the sale price of the home. It is the fee that protects both you and the lender in case a question of ownership ever arises. It also guarantees the title company made a thorough search on your behalf.
Title Search Fee — Your title company will research your property to ensure there are no liens or other problems with ownership prior to completion of the purchase.
State Mortgage Taxes — Fee charged by the state as a tax on the sale of the home.
Escrow — This account contains funds used to pay fees that are not billed monthly. Items that typically require escrow accounts include:
- Hazard Insurance — Protects both you and your lender in the event of damage to your home.
- Property Tax — Charged by local government based on the value of your property.
- Mortgage Insurance — Protects the lender should a buyer default on the home loan.
Settlement Fee —Covers the services of the settlement agent that handles all the payment transfers during the closing.
Attorney’s Fee — In some states, it is required that an attorney be involved with the closing process.
Flood Insurance Fee — Some states require that you determine if the property is in a Special Flood Hazard Area.
Home Warranty Fee — An optional service that covers repairs or replaces defective items in the home.
Home Inspection Fee — A professional inspection of the house to identify any problems associated with the home is highly recommended and often required.
Survey Fee — A review of your property to establish official boundary lines is conducted by a licensed surveyor and is normally required by the lender in order to secure your mortgage.
Notary Fee — A licensed notary will certify the identity of the individuals signing the loan and other documents.
Recording Fee — Charges for recording a deed with the appropriate government agency.
Interest — A prorated fee is charged for your mortgage interest from the date of funding until the time of the first monthly mortgage payment.
Lender Fees/Charges —The costs associated with processing your loan through the lender’s system. These costs are disclosed on the Good Faith Estimate document you receive once your loan application is completed.
- Discount Points — You can pay points at closing in order to lower your overall interest rate and mortgage payment. One point equals 1% of the home loan value.
- Loan Origination Fee — The fee you pay for the lender’s services in administering your loan. Varies with the lender and type of loan. A loan origination fee of 1 to 2 percent of the mortgage amount is common.
- Mortgage Interest — The interest on the loan amount from the date of closing to the last day of the month.
- Tax Service Fee — A tax service agency monitors the property tax payments for the loan. If property taxes are part of the escrow account, the tax service will obtain the tax bills for payment by the lender.
- Document Preparation Fee — Covers the cost of preparing the loan documents.
Thanks Kathleen O’Brien with W.J> Bradley Mortgage for the great information!!