When buying a home, you do not only have to make a down payment, but you will also have to pay for the costs of closing. Closing begins when you sign a contract of purchase and ends around eight weeks later. These are a plethora of fees. Your mortgage lender will usually give a good faith estimate of the costs of closing when you ask them for a loan.
Below are some of the most common charges and fees that you can expect during closing:
Points—is a term for loan origination fees where a point equals one percent of the amount of loan and will go to the lender.
Mortgage Broker Fees—since brokers handle most loans, many loans include this fee. This could include points and broker processing fees.
Tax Service fees—is a kind of service that keeps an eye on the property tax and helps the lender make certain that you are updated on your tax payments and protects their investment.
Credit report—is a routine part of the loan application process where the lender will pull out your credit report to find out if you are a risk as a borrower. This will cost up to $60.
Document Preparation—you will have to pay some high fees since preparing loan documents before was long and detail-oriented. Even though the process is easier these days through computers, the fees remain high.
Wire Transfer Fees—while this may not be a big fee, most lenders will include this. They have taken advantage to charge fees for the process of transferring money.
Appraisal Fees—payment that goes to the appraiser who will inspect the home. It is an important step in the mortgage application process since it allows lenders to determine that the home is worth what they are lending you to purchase it.
Flood certification—your lender should find out if your potential home is near a federal flood zone area, so they must pay an outside party to certify about this information.
Title Insurance—a title company is involved in researching the history of the home and a title insurance policy is drawn up to protect both borrower and lender from future losses due to claims against the home or title.
Costs of closing will differ from state to state and how you negotiate. While buyers usually pay most fees, sellers could pay some too. Often, buyers often get lenders to contribute as well. Keep in mind that lenders who are offering a “zero-closing cost” loan will usually charge a higher rate of interest. A professional settlement agent will orchestrate the closing. The agent will file the documents and pay taxes on your behalf and makes certain that the task is done and recorded as specified by law.
There are some states where the agent must be a lawyer while in others; it is an independent settlement or an escrow company, which is licensed by the state to hold the necessary documents and the money as well.
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