We know how complex purchasing a property is. We also understand that it is not a cheap purchase. This is why we have to be ready for it. We need to understand several things especially in terms of the fees and charges we pay. Thus, we need to understand what items are included in the closing costs. We can check these fees in the Good Faith Estimate or GFE. You can request for a GFE from your lender before you apply for a loan.
It is important that we are aware of the different fees and charges, and what they are for. This will not only help us prepare the amount needed but will also give us the chance to lower the total closing cost we will pay. Bear in mind that some of these fees are negotiable. You can also use the information in finding the right lender for you.
Here are some of the fees included in your closing cost. There are more but this is the most common:
Points – Points are paid to the lender. These are equivalent to a percentage of the amount loaned. One point for instance, is equivalent to 1%. Points are like pre-paid interests. Paying points will help reduce the interest rate. The more points you pay, the lower your interest rate will be. However, paying more points is ideal only if you plan to stay in the house for a long time or throughout the life of the mortgage.
Origination fee – This is also paid to the lender. You can ask the lender to discuss the details of this fee and probably negotiate some of them. This normally includes the amount charged by the lender for processing your application. It has been a common practice in the past for lenders to ask for a fee before the borrower can apply for the loan. Such fee is not refundable. However, the government no longer allows this.
Attorney fee – This is payment for the services of a lawyer. A lawyer is tasked to prepare certain documents to make sure that they are done correctly. All parties in the transaction can hire their own lawyer.
Appraisal fee – This is for the services of an independent appraiser. The lender will ask an independent appraiser to look at the property you will purchase to verify its market value.
Fees for title services – It is important that the property involved have a good title. A title company will verify this. They will check all related documents and check if the seller has indeed the right to sell the property. This is to protect both the buyer and the lender. After the investigation, the title company will release an opinion letter or a commitment to issue title insurance.
Property insurance – The lender will require that the property be insured throughout the life of the mortgage. They will also require that a one-year premium be paid in advance. This will be included in the closing cost if the borrower has not paid it yet.
Other fees may be included in the closing cost. What is important is that you are aware of them and that you understand each of them.
![[Valid RSS feed]](http://www.realestateproarticles.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites