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Closing Costs in a "Nutshell"
Closing can be one of the most confusing aspects of buying a
home or refinancing a loan. The process begins with your bid, the sales
agreement and your loan application. It ends the day of closing when all of
the necessary documents are reviewed and signed, and corresponding fees are
paid. Usually, it takes between 20 to 60 days to complete the closing
process. Several individuals are involved in the closing process in addition
to you and the seller, including title company representatives, your
homeowners insurance agent and of course your mortgage consultant. Keep in
mind that it takes time to gather all of the documentation, the more we work
as a "team" in acquiring the necessary documentation for your situation, the
quicker we can get your loan approved and closed.
Loan Costs
The fees required to obtain your mortgage may include:
Closing Costs
Real estate practices and closing costs vary from based on
the loan program and other factors. Generally, you can plan to spend an
additional 1 to 3 percent of the loan amount in settlement expenses.
There are loans available with Zero closing costs. However, you are usually
paying for this option in the long run with a higher interest rate.
Application Fee & Credit Report Fee
There is no up-front application fee with me. Credit report
fees are paid by me as a special service to my clients.
Appraisal Fee
This fee covers an independent appraisal of the home you
want to purchase or refinance. The lender requires this estimate of the
market value of the house in order to make the loan. The appraisal fee is
usually $300.00 to $350.00 and is paid to the independent appraiser when
he/she comes to your home to inspect it.
Escrow/Title Company Fees
Closing of the loan transaction and title insurance is
provided by the escrow/title company. Title Company fees are usually based
upon the purchase price/loan amount of the subject property. The title
search involves reviewing public records in local government offices,
including recorders of deeds, county courts, tax assessors and surveyors.
Records of deaths, divorces, court judgments, liens and contests over wills
(all of which can affect ownership rights) must also be examined. The title
search assures you and your lender that there are no claims against the
property Title Company fees can range anywhere from $250 to $500 for the
escrow portion of the transaction and an additional $300 to $500 for title
insurance fees. I can give you a more accurate estimate of these charges
once we have reviewed your situation and determine a loan amount.
Documentation Fees
Some lenders charge miscellaneous fees for various services,
such as underwriting, processing and documentation preparation, which
usually total under 1% of the loan amount.
Home & Pest Inspections
For a purchase transaction, various pest and/or other
inspections may be recommended by your Real Estate Agent. A home and/or
pest inspection by a qualified specialist offers assurance that the home
you are purchasing is structurally sound and free of termites and any
related damage. The costs for these services vary depending upon the
location and size of the property, and the professionals you choose. (For
advise on this, you and your Real Estate agent can discuss the best option
for your unique situation.)
Homeowner's & Hazard Insurance
Homeowner's and hazard insurance offer protection against
physical damage to your new home by fire, wind, vandalism and other causes.
Most lenders require that the annual premium on your homeowner's insurance
be paid in advance and put into effect at closing. Prices for homeowner's
insurance vary depending upon the value of the home, the location and the
insurance agency. For example, homeowner's insurance for a $200,000 property
could cost between $600 to $700 annually. (For more information, speak with
your insurance agent)
Interim Interest or Daily Rate of Interest
This cost is based upon your closing date and covers loan
interest from the day you close through the end of the month. Therefore, it
can range from 0-30 days' interest, payable to the new lender.
Loan Origination Fees & Discount Points
The origination fee is charged for the lender's work in
evaluating and preparing your mortgage loan. Essentially, paying points is
a means for the borrower to pay down the interest rate. Paying points can
save thousands over the long term, so if you plan to be in your new home
three to five years or longer it's certainly an option to consider. One
point equals one percent of the loan amount. For example, one point on a
$75,000 loan would be $750. For a refinance transaction, the points can be
financed by adding them to the loan amount.
Mortgage Insurance (PMI)
Buyers who make down payments that equal less than 20% of the value of the house may be required by lenders to obtain
Mortgage Insurance. The policy covers the lender's risk in the event the
buyer fails to make loan payments. Premiums are usually paid annually from
an escrow or reserve account, or in a lump sum at closing. A buyer whose
mortgage is insured by FHA or guaranteed by VA will have to pay FHA mortgage
insurance premiums or VA guarantee fees.
Document Preparation Fee
This is usually a flat fee paid to the title company which
can range from $50 to $200.
Property Taxes
This includes property taxes that may be due soon that you
would normally pay on your own or through an impound account. If your
property taxes are due in the next few months, the lender may require you to
pay them ahead of time with this closing. If you choose to have the taxes
and homeowners insurance included in your total monthly mortgage payment
(impound account), the lender will usually require 2-3 months of tax
payments held in an impound account so they can make the tax/insurance
payments for you.
Recording Fee
This fee, which is paid to the title company, involves
recording the transfer of title with the county clerk's office. Recording
fees vary from state to state and county to county, however, each county
sets a fixed price per page which is usually about $50.
CA Department Of Real Estate, License
#00654852
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