Below is an overview of the types of closing costs you may incur on your loan. Some are one-time fees, while others recur over the life of the loan. When you apply for a loan, you will receive a Good Faith Estimate of Settlement Charges and a booklet that will explain the costs in detail.
- Loan Origination Fee: This fee covers the lender’s administrative costs in processing the loan. A one-time fee often expressed as a percentage of the loan.
- Appraisal Fee: This is a one-time fee that pays for an appraisal – a statement of property value – for the lender. The appraisal is made by independent fee appraiser.
- Credit Report Fee: This one-time fee covers the cost of the credit report that is run by an independent credit reporting agency.
- Title Insurance Fees: There are two title policies, a lender’s policy (which protects the lender against loss due to defects in the title) and a buyer’s title policy (which protects you). These are both one-time fees.
- Escrow Fee: Fee charged by the title company to handle funds and documents of buyers and sellers.
- Document Preparation Fee: There may be a separate, one-time fee that covers the preparation of the final legal papers, including the note and deed of trust.
- Prepaid Interest: Depending on the time of month your loan closes, this charge may vary from a full month’s interest to just a few days. If your loan closes at the beginning of the month, you will probably have to pay the maximum amount. If your loan closes at the end of the month, your will only have to pay a few days’ interest.
- PMI Premium: Depending on the amount of your down payment, you may be required to pay an upfront fee for mortgage insurance (which protects the lender against loss due to foreclosure). You may also be required to put a certain amount for PMI into a special reserve account (an impound account) held by the lender.
- Taxes and Hazard Insurance: Depending on the month you close, you may be required to reimburse the seller for property taxes. You will also need to pay for an entire year’s (or more) hazard insurance premium upfront. In additional, you may also be required to put a certain amount for taxes and impounds into a special reserve (impound) account held by the lender.
- Recording Fees: Fee paid to county to record documents.
- Inspection Fees: fees charged for various inspections of said property.
- Home Warranty Plan: Optional Warranty Package that pays for repair / replacement of home’s major systems and appliances.
Source: Ticor Title
