Buying a home is exciting and frightening all at the same time. However, you can put your mind at ease if you know what to expect when it comes to closing costs. Closing costs are those costs that you will need to pay upfront on the day of the closing. In some situations, the seller will pay part of the closing costs. It’s best to be prepared to cover them all in case that is part of your agreement with the seller.
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💲 What are Lender Fees?
When you obtain a mortgage, your lender has certain fees they will charge you. It’s possible you will be required to pay all the fees listed or just a select few.
- An origination fee is charged by your lender as compensation for providing you with a mortgage loan.
- A discount fee is the amount charged when you pay for points to buy down the interest rate. The more you pay, the lower your interest rate will be.
- You may be required to pay an application fee to offset the costs of processing your loan.
- A processing fee may be charged to cover the costs of processing your loan.
- An underwriting fee may be charged to determine if the lender is willing to approve your mortgage loan based on your application.
- An administrative fee, which is like a processing fee, may be charged to cover the costs of processing your loan.
- A document preparation fee may be charged for the preparation of loan documents and other paperwork pertaining to your loan.
- You may be required to pay a courier fee. This is a charge to cover the costs of sending your information to different parties.
- A wire transfer fee may be charged to cover the costs associated with the transfer of funds to the closing agent for disbursement to other parties.
📜 What are Title Fees?
Before the lender agrees to mortgage property, it must be determined that the seller is the actual owner of that property. The following fees are for actions that assist the lender in verifying the current owner and that all information is correct.
- The title company charges a title search fee to search public records to determine if there are any liens associated with the subject property.
- You will have to pay for title insurance which protects the buyer and the lender in the event there is fraud or other issues that were not determined with the title search.
- The title exam fee will be charged by the closing attorney to examine the title to determine if there are any issues such as breaks in the chain of title, unsatisfied mortgages, liens or judgments.
- An attorney fee may be charged for the time an attorney spends resolving title issues, preparing closing documents and conducting the closing itself.
💵 What are Government Fees?
When you purchase a home or refinance, the government requires such changes to become a matter of public record. You will also be required to pay taxes on the transaction. You can expect the following charges:
- Recording fees
- Intangible taxes
- Transfer taxes
- Property taxes
📝What are Third Party Fees?
You will be required to use third parties when navigating through the loan process. These third parties charge fees for their services that will be required up-front when the services are performed. Some of these third-party charges include:
- Credit check fee
- Appraisal fee
- Survey fee
- Flood certification fee
- Tax service fee
💰 Are there Pre-Paid Items?
Your lender may require prepayment of certain items. Your lender will determine what should be prepaid and this will depend on your situation. Some of these items to expect include:
- Depending on when you close on your loan, you may need to prepay interest. Your daily interest amount is based on your interest rate.
- You will be required to pay a hazard insurance premium to protect your lender’s investment.
- If your loan is over 80 percent of your home’s value, you may be required to pay a mortgage insurance premium.
- You may be required to deposit money into an escrow account to cover the cost of mortgage and hazard insurance as well as property taxes when each comes due.
By law, your lender is required to provide you with a Good Faith Estimate (GTE) which details all the closing costs that will be required. You should receive the GTE no later than three days after applying for a mortgage. This estimate will let you know exactly what to expect which allows you to plan for the amount of money you’re going to need to close the loan.
Your real estate agent is the best source of information about the local community and real estate topics. Give Rita Boswell Group a call today at 614-547-3229 to learn more about local areas, discuss selling a house, or tour available homes for sale.