WHAT MAKES UP YOUR CLOSING COSTS
Everyone’s closing costs vary slightly, but below are some examples of what might be included: Application Fee Fee charged by lender to pay for the fixed costs related to mortgage loan processing, such as appraisal, credit report, and underwriting. Closing Fee The fee charged by the agent who prepares the closing documents and closes the loan on behalf of the lender. Commitment Fee This often called an orgination fee and is generally computed at 1% of the mortgage amount, or any amount as charged by lender. Discount Points Each point is equal to 1% of the mortgage amount. Points are used by the lender to adjust the yield on the mortgage when it is sold to an investor. By paying more points, the borrower can obtain a lower mortgage interest rate. Funding Fees Normally applicable on VA loans only, equal to a percentage of the loan amount. The fee is due at closing or may be added to the loan amount and financed. Homeowner’s Insurance One year premium is due in advance of the time of closing. Mortgage Insurance Insurance required by the lender when the down payment is less than 20%. In case of loan default, this insurance reduces the lender’s loss. Pre-Payables Adjustment to escrow accounts from the date of closing to the date of the first payment. Interest is paid through the end of the month of closing; taxes are paid through the end of the month of closing, plus the following month. Two months of PMI may be collected. Two months of homeowner’s insurance may be collected. A homeowner’s insurance policy must be provided along with a receipt showing that the first year’s premium is paid. Processing Fee Fees charged by the escrow processor (either working for the escrow company, title company, or real estate company) for administrative escrow services performed from the point - of - contact through closing. Recording Fees Fees charged by state and municipal entities for entering the closing documents into public record. Survey Fee Fee usually required and used by the lender to check for encroachments from within or from outside the subject property. Title Insurance Provides protection for lenders and homeowners against financial loss resulting from legal defects in the title. Underwriting Fee Fee usually included in the application fee, although practices do vary lender to lender. Flood Certification Fee Lender must determine if the home requires flood insurance. Tax Service Fee A one-time collected at closing which arranges for the payment of real estate taxes from the borrower’s escrow account to the taxing authority or verfies payment to the taxing authority.
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