What Are Closing Costs?
Are you looking to start the home buying process? Have you started to wonder what the extra costs are? There's no need to worry now because we've got you covered! In this blog, you'll find just what closing closts you will have when you've made an offer and are in escrow. So let's go ahead and get into it all and what each one means!
Appraisal Fee: This fee pays for the appraisal of the property. You may have paid this fee at the beginning of your loan application process.
Credit Report Fee: This fee covers the cost of the credit report that's requested by the lender. This too may have already been paid when you applied for your loan.
Loan Origination Fee: This fee covers the lender's loan-processing costs.
Loan Discount: You will pay this one-time charge if you have chosen to pay points to lower your interest rate. Each point you purchase equals one percent of the total loan.
Title Insurance Fees: These fees generally include costs for the title search, title examination, title insurance, document preparation, and other miscellaneous title fees.
PMI Premium: if you buy a home with a low down payment, a lender usually requires that you pay a fee for mortgage insurance. This fee protects the lender against loss due to foreclosure. Once a new owner has 20 percent equity in their home, however, he or she can normally apply to eliminate this insurance.
Prepaid Interest Fee: This fee covers the interest payment from the date you purchase the home to the date of your first mortgage payment. Generally, if you buy a home early in the month, the prepaid interest fee will be substantially higher than if you buy it towards the end of the month.
Escrow Accounts: In locations where escrow accounts are common, a mortgage lender will usually start an account that holds funds for future annual property taxes and home insurance. At least one year advance plus three months worth of homeowner's insurance premium will be collected. In addition, taxes equal approximately to three months in excess of the number of months that have elapsed in the year are paid at closing. (If six months have passed, nine months of taxes will be collected.)
Recording Fees and Transfer Taxes: This expense is charged by most states for recording the purchase documents and transferring ownership of the property.
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