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Step Seven - Closing Day
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When you inquire with a mortgage lender/broker for a new home loan they usually prepare a "Good Faith Estimate" of closing costs. Although mortgage lenders are only required to mail a copy to you within three business days of application a smart consumer should always request a copy faxed or emailed before submitting an application since this estimate will provide you with a written verification of the fess you were quoted by the lending specialist.
It is important to note that just because the lender is the one who prepares the estimate not all closing costs are charged by the lender. The lender is only preparing an estimate of the costs you may incur when buying or refinancing and is not required to list all potential costs nor does the lender know what all the costs are actually going to be. The estimate is an educated guess based on past experience. Some things will get left out. Always anticipate the actual third party costs (such as title, appraisal, recording fees) are going to be more than the estimate.
When comparing lenders, please do not look at the "total" cost. Only compare the costs actually charged by each lender. Both lenders are only estimating third party charges and some lenders may even habitually underestimate just to convince consumers they are cheaper. Below is a detailed description of costs you may have to pay when you buy or refinance your home.
There are two main categories of closing costs.
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Non-Recurring closing costs - Items that are only paid one time.
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Recurring closing costs - Items you pay time and again over the course of home ownership, such as property taxes and homeowner's insurance.
Please remember that not all of the items listed below always appear on a lender's good faith estimate so you should ask your loan specialist about all these fees before you apply. |
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| Common Closing Costs |
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Loan Origination Fee The loan origination fee is often referred to as "points." One point is equal to one percent of the mortgage loan. As a rule, if you are willing to pay more in points, you will get a lower interest rate.
Discount Points Any points in addition to the loan origination fee are called "discount points."
Appraisal Fee Appraisal fees vary depending on the state, type of property and home value. Unique and more expensive homes usually have a higher appraisal fee. Additionally, appraisal fees on VA and FHA loans are higher than on conventional loans because they require the appraiser to inspect items not strictly associated with value.
Credit Report As part of the underwriting review, your mortgage lender is required to review your credit history. The credit report fee can range from $7 to $60 or higher depending upon the type of credit report required by the lender.
Lender's Inspection Fee You normally find this on new construction and is associated with what is called a 442 inspection. Since the property is not finished when the initial appraisal is completed, the 442 inspection verifies that construction is complete before you close on your loan.
Mortgage Broker Fee Almost 75% of all mortgage loans are originated through mortgage brokers and they will sometimes list your points in this area instead of under Loan Origination Fee. They may also add in any broker processing fees in this area. The purpose is so that you clearly understand how much is being charged by the wholesale lender and how much is charged by the broker. Wholesale lenders offer lower costs/rates to mortgage brokers than you can obtain directly, so you are not paying "extra" by going through a mortgage broker.
Tax Service Fee Independent service fee charged by the lender to monitor property tax payments regardless of whether or not you escrow taxes in your monthly payment or pay them separately throughout the year. This fee usually runs between $70 and $100.
Flood Certification Fee Your lender must determine whether or not your property is located in a federally designated flood zone. |
NOTE: If you are applying for a hard money loan with a private lender/individual closing costs may be drastically different as they control the guidelines. BE SURE TO ASK ABOUT CLOSING COSTS UPFRONT. You can often negotiate with the banks and asset management companies as to who pays what closing costs, but ONLY before the contract offer is signed.
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Features:
- Quick calculators: solve for any missing loan variable - sales price, down payment, loan amount, interest rate, term or payment
- Mortgage Qualifier: Discover what you can afford, using standard underwriting guidelines.
- Loan Spread Calculator: Enter your loan info., and see the effect of different interest rates in an at-a-glance format.
- Amortization Schedules: You can also play what if with a large range of variables
- Estimate Closing COsts: See what your new property will really cost
- Bi-Weekly Payments: Discover how much time and money you'll save by paying bi-weekly
- Pre-Payment Calculator: See the effects of pre-paying your loan. A great way to maximize your equity.
- Home Sellers Proceeds: Estimate your net profit after selling your property
- Refi. Calculator: Should you refi. that loan of yours?
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In addition, the (MEMBERS ONLY) includes an interest rate conversion table , sample text for closing credit accounts , a Documentation List to help you gather your paperwork, a Home Inspection form to help you review potential homes, a Fraction/Decimal Conversion Chart , and useful tips for home buyers and sellers.
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