What Are Closing Costs

closing-cost-picWhat Are Closing Costs

Closing costs are often confusing. Below is a list of costs and explanations for each. When you apply for your loan, you will receive a Good Faith Estimate of these charges.

Appraisal Fee: A one-time fee to pay an independent fee appraiser.

Credit Report Fee: A one-time fee covering the cost of the credit report.

Document Preparation Fee: There may be a separate fee covering the preparation of the final legal papers.

Homeowners Fee: Some associations may require an up front deposit or dues, as well as a fee to transfer their records from seller to buyer (transfer fee). These amounts vary for each association.

Loan Discount: A one-time fee to adjust the yield on the loan to what market conditions demand (often called POINTS).

Loan Origination Fee: A one-time set up fee charged by the lender for their administrative costs.

Miscellaneous Title Charges: The title company may charge fees for items such as a title search, title examination, document preparation, recording fees, notary fees, and a closing or settlement fee.

PMI Premium: Depending on your down payment, you may have to pay an up front fee for mortgage insurance. Lenders may also require monies to be held by them in a reserve account.

Prepaid Interest: This is a per diem charge that may vary depending on the time of month your loan closes.

Taxes and Hazard Insurance: Depending on the month your property closes, you may be required to reimburse the seller for property taxes. You will have to pay a year’s hazard insurance premium up front, and may be required by the lender to put a certain amount for taxes and insurance in a reserve account. This account is held by the lender.

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