Loan-Related Closing Costs

Please keep in mind that I can waive closing costs and in some cases I can pay all of your closing costs.

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Loan Origination Fee
This covers the administrative expenses in setting-up and processing the loan. The loan origination fee may be a percentage of the mortgage amount.

Points (optional)
An option for the home buyer is to pay points to lower the interest rate at which the loan will be repaid. Each point equals 1 percent of the mortgage amount. For example: on a $150,000 loan, 1 point would equal $1,500.

Appraisal Fee
The fee for having the house appraised may be incorporated into the closing costs or payment may be required by the lender at the time the loan application is submitted.

Credit Report
The lender uses a credit report to determine the creditworthiness of the loan applicant. This fee is often paid when the loan application is submitted.

The above fees are typically located in the 800 section of the good faith estimate or initial fees disclosure.

Interest Payment
Typically the buyer is required to pay interest on the mortgage loan to cover the time between the closing date and when the first mortgage payment period begins. For example: If closing is on May 15. Your first monthly payment begins to accrue interest on June 1 with your first mortgage payment due July 1. At closing an interest payment covering the accrual period between May 15 and May 31 may be required.

Escrow Account
At closing a payment may be required to fund the escrow account if the lender is paying home insurance, property taxes and/or other expenses out of the escrow account.

Title Company Fees and State Specific Fees  Every title company and state is different. Title company fees are based on the title agent, the contract and the particular county you are closing in. fees may vary based on the county. For example in Broward county Florida, typically the buyer picks up the majority of the closing fees where in Palm Beach County Florida typically the seller picks up the majority of the costs. It is my job to contact the title company involved and get an accurate estimate of the fees.

 

Let me explain each item one at a time by number: The number you will find on the old version of the good faith estimate or on the new version of the initial fee disclosure statement.

801 Loan Origination Fee - Is a fee that the broker/Banker may charge. Usually this is done in a situation where the customer is trying to "buy the rate down" . Loan origination fee is commonly referred to as points. If you pay 1% of the loan amount you have paid a "popint" typically points are tax deductable.

802 Loan Discount Fee - Is also a fee used to buy the rate down. A broker can use an origination fee to lump processing fees or applicaction fees but a discount point is used strictkly to pay the source to get a lower rate.

803 Appraisal Fee -  Is the cost of the appraisal used to get a measure of the value of the home. Since banks instituted the Home valuation Code of Conduct last year, the appraisal is ordered through an appraisal management company appointed by the bank. Since the HVCC has been instituted, the quality of appraisals has gone down with little recourse for the customer.

804 Credit Report - This fee is for the cost of your lender pulling a credit report from the three main credit bureaus. Trans Union , Equifax and Experian. The lender will base your loan off of the middle of these three scores. Mortgage brokers and bankers cannot make money on the credit report so they are required to charge you their cost.

805 Lenders Inspection Report - This fee is rarely seen except on FHA mortgages. Sometimes if a lender is nervous about the soundness of construction of the subject property they may require an impartial third party opinion performed by a licensed contractor. They are required by law to charge you exactly what their cost is.

808 Mortgage Broker Fee - Is another way of accomplishing the same effect as the mortgage origination fee. Call it what you may, if a broker is chrging you more than 1% with either of these fees that is a good sign that you are being overcharged. Nowadays many lenders will not charge a processing or applicatyion fee but they will charge a mortgage broker fee.

809 Tax Related Service Fee - Is a fee charged by the lender for verifying taxes on the property. Fha loans do not require this fee.

810 Processing Fee - is a fee usually charged by a third party processing company. Nowadays many lenders outsource the hands on tasks of ordering title , ordering appraisal and putting the file together in an organized manner. Processing is not easy so if you get a call from the processor, do everything you can to help.

811 Underwriting Fee - This fee is the paperwork fee of the bank who is going to approve your loan. They review all the work done by the broker or loan originator and processor and double check to make sure the is in the best interest of their bank.

812  Wire Transfer fee - is a fee charged by the bank if they intend to wire funds to the closing agent. Years ago many banks wrote large checks but nowadays they prefer to wire the money. Usually the wiring bank has a fee of about $10.

813 Flood Cert - is a fee the bank charges to verify whether or not the borrower is in a flood zone. To determine this the banks use an impartial third party company that refers to giant mapps with 100 year records

814 Application Fee - Just about every lending institution has an application fee to cover the cost of their overhead that accompanies each and very loan. If you do not see a line item that says "application fee" most likely the fee is buried somewhere else such as mortgage broker fee or origination fee. Application fees are used to cover the cost of offices, papers, compueters, toner and other day to day fees associated with running a mortgage business.

 The 900 Section  Escrows

901 Per Dium Interest - Described above. This fee is based on the day in the month you close. When refinancing this becomes a mute point because the per dium on the existing loan is exactly inversely related to the per dium on the new loan. In opther words , don't sweat this fee.

902 Mortgage Insurance Premium - This premium is paid on all FHA loans and conventional loans (Fannie Mae or Freddie Mac) above 80% loan to value.

903  Hazard Insurance - Typically when purchasing the borrower is required to pay one year of insurance up front along with 2 months extra in an escrow account.

The 1000 SEction Reserves Held by the Lender

1001  Hazard Insurance Premium - As previously mentioned the lender requires ample reserves if you are escrowing. If your loan is less than 80% loan to value you have the option of waiving escrows. But even if you are waiving, with each purchase one year of insurance is required to be paid up front.

1003 Taxes Escrow - These escrows usually work out to be 5 months if you are purchasing or possibly more if you are refinancing. When refinancing this escrow is based on how many months you are away from having  taxes due.

The 1100 section Fees are associated with the fees of the title company, attorney or closing agent handling your file.

1101 Closing Fee - Is the fee title companies, closing attorneys charge for closing your loan. This fee represents more work than just sitting at the closing and telling you where to sign. The closing agent also is responsible for verifying that you are receiving a clean title to the property. What this means is that there are no liens or encumbrances attached to the property from the previous owner. Years passed there were many other fees listed but now fees are grouped into mainly closing fee and title insurance.

1105 Document Preperation Fee - is a fee charged when a closing agent has to down load and print a very large closing package. Some closing agents lump this cost into closing fee, others spell it out seperately. Toner and paper add up so this is their way of recouping some of those costs.

1106 Notary Fees - are typically charged when a "mobile closer" is used to perform the closing outside of the office of the closing agent. This person may be part of a third party company or they may be an employee of the closing agent.

1107 Attorney Fees - Some states are attorney states and others give the borrower the option of closing with a title company. Also in certain cases such as a builder loan or a new home purchase a borrower will hire an attorney on his behalf. This line item can be used to pay either the seller's or the buyers attorney.

1108 Title Insurance - is the main fee from which closing agents make their money. The fee is derived from a title company fee schedule mandated by the state in which the property is located. The larger the purchase or loan amount, the larger the fee. If you are refinancing within the first 4 years of owning your home, and you have a copy of your owners title policy, you are entitled to a re-issue credit that lowers this fee.

1109 Title Endorsements - are typically 10% of the title policy plus extra for certain endorsements for various purposes. Additional endorsements are required for adjustable rate loans, properties in planned unit developements and other unique situations. Nowadays many title companies lump the endorsement fee in the title insurance line item.

 1110  Title Search - Is a fee that is associated with checking the title records to make sure there are no liens on the property. Many title companies must pay a fee to the county in question for title information attached to the property.

Government Transfer and Settlement Charges  (1200 Section)

1201 Recording Fees - Recording fees are based on the number of pages that the new mortgage has. The closing agent is required to record each page with the county the property is located in. Pages are typically $6.00 or $7.00 dollars per page.

1202 City County Tax/Stamps - This fee is sort of like a sales tax on a real estate transaction. These fees vary from state to state. As an example in Florida the stamps are .0035% times the loan amount.

1203 State Tax - Is a similar fee that in Florida is calculated by using a factor of .0002 times the loan amount.

Additional Settlement charges are fees that are charged by 3rd party companies.

1302 Pest Inspection - Is done on FHA loans to ensure that there are no termites or other pests creating havoc to the structure

1303 Survey - A survey measures the boundary of the lot. Not to be confused with the appraisal which provides a fair market estimate of the value of the entire property. the job of the surveyor is to establish your boundary to double check your neighbors haven't built a fence on your property or something of that nature. If you are doing a refinance, we typically can use your prior survey as long as you haven't done any major improvements to the property. e.g a fence or a pool or a new room

1304 Realtor Processing fee - Many loan officers do not disclose this fee because they chaulk it up to the realtors responsibility to disclose this with the contract. But if we are trying to get a good estimate of closing costs, a smart loan officer will look at the contract to double check. Just like lenders, mortgage brokers and title companies have "paperwork fees" , realtors are quite often responsible for a paperwork fee to their parent company. If it is not charged, the fee will be subtracted from their comission.

1305 Condo Questionaires- The are forms that the lender requires to check the health of a condominium association. They also want to see if there is an overly high percentage of investors in a given community which can be a risky investment to the bank.  management companies for communities typically charge $100-$150 per form

 

 

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