What Are Closing Costs?
Lender’s Points, Loan Origination, Or Loan Service Fees
A point is one percent of the loan amount. Lenders often charge points to give you the lowest rate possible. Some lenders won’t charge points for making the loan but might charge loan origination or loan service fees. These fees range from zero to three percent (or more) of the loan amount.
Loan Application Fee
This fee, the lender’s non-refundable charge for taking your application, ranges from $0 to $50.
Lender’s Credit Report
The lender will hire a credit bureau to run a credit check on you. The lender is charged for the service and passes along that cost to you. This fee ranges anywhere from $40 to $150 or more.
Lender’s Processing Fee
This is a charge for pushing papers around the office. In this age of four-minute computer-assisted loan approvals, this fee of $75 to $150 may be negotiable.
Lender’s Document Preparation Fee
Often considered a junk fee, especially since many of the forms are stored in the computer, this charge usually runs from $50 to $200.
Lender’s Appraisal Fee
Once you’ve applied for the loan, the lender has to make sure that your home is actually worth what you’re paying for it because you’re using it as collateral for the loan. Lenders tend to charge you what they’re charged by appraisers–usually $200 to $450 or more.
Prepaid Interest On The Loan
This is the daily cost of your loan from the day of the closing through the end of the month in which the closing occurs. Although you usually pay your mortgage in arrears (say, on July 1 for June), this cash is due upfront at the closing.
Lender’s Insurance Escrow
Most lenders will want you to have an insurance escrow, in which they keep enough cash to pay your annual insurance premium plus a cushion of two months’ worth of premiums. You usually pay the first year’s premium upfront at or before the closing, plus an additional amount to help build the escrow for the second year’s premium.
Lender’s Real Estate Property Tax Escrow
Alongside the insurance escrow, the lender collects from you and then holds in your account, enough cash to pay your annual property tax bill, plus an extra 1/6 (or, two months’ worth). Before the closing, you’ll kick off the account by putting in anywhere from 33 percent to 50 percent of the next estimated tax bill, depending on when you expect to close and when the next tax payment is due. (After closing, you’ll make monthly insurance and property tax escrow payments along with your monthly mortgage payment).
Lender’s Tax Escrow Service Fee
This fee, to set up the escrow, can run anywhere from $40 to $80 or more.
Title Insurance Cost For The Owner’s And Lender’s PolicyLenders want to be sure that their interest in your property is insured by the title insurance company. The cost for this coverage is based on the dollar amount of the mortgage you obtain from your lender.
Special Endorsements To The Title
Depending on the type of property you pick, your lender may request that special endorsements be added when the lender’s title policy becomes final. An endorsement is specific insurance coverage that the lender wants only for his or her benefit and protection. A location endorsement, which guarantees that the home is located as described in the loan, may cost $15. If you choose an adjustable-rate mortgage (ARM), the variable rate endorsement may cost another $60, depending on the title company and the state in which you are located. For a townhouse, there may be a PUD (planned unit development) endorsement. For $15 to $50 each, endorsements can add a chunk of money to your closing costs. (These costs fluctuate from state to state and from title company to title company, and are subject to local custom).
House Inspection fees
if you have your home inspected by a professional home inspector, he or she will probably insist on being paid when the work is completed. But if for some reason, you haven’t already paid this cost, it will be tacked on at the closing. These days, professional home inspectors and structural engineers often charge for their services based on the price of the home. Expect to pay $225 to $400 or more.
Title Company Or Escrow Company Closing FeeThis fee can run anywhere from $150 to $400 and up.
After you close on your home, your deed and your mortgage must be recorded with the county in which the home is located. This cost usually runs from $25 to $75.
Local (City, Town, Or Village), County, And State Property Transfer TaxesAlso known as stamp taxes (because you’re often given a stamp to paste on the deed), transfer taxes are another way for your town, county, and state to raise revenues. Essentially, you and the seller are being charged for buying and selling property. The charges that you, the buyer, will pay vary from city to city and from state to state. Sometimes the seller picks up the entire cost; sometimes the buyer does. In general, property transfer taxes can range from $0 to $5 per $1,000 of the purchase price, or more. In some areas, you may be assessed a flat fee of $25 or $50 per transaction.
Whether you decide to get an attorney to help you through the home-buying process depends in large part on local custom. In Indiana and California, buyers and sellers are discouraged from using attorneys. In other parts of the Midwest and the Northeast, they’re commonly used. If you need an attorney, you can often negotiate a flat fee, which might start at around $300 but will go up according to the experience of the attorney and how complicated your transaction is. In some places, it may be difficult to find an attorney who will charge only a flat fee. You’ll then have to pay an hourly rate, which could run anywhere from $80 to $200 an hour, or more.
Condo Move-in Fee
When it’s imposed by an association, this charge can range from almost nothing to more than $400.
Co-op Apartment Fees
Some co-op associations require a small fee for transferring shares of stock, for doing name searches, and/or for moving in. Each of these fees can range from $50 to more than $500.
Credit Checks For Condo And Co-op BuildingsSome condos and co-ops will want to check your credit before they allow you to move into the building. If a fee is charged, it can range from about $75 or more.