AN EXPLANATION OF ESTIMATED CLOSING & PREPAID COSTS
A “Good Faith Estimate” is prepared to accurately reflect all of the charges that all of the companies that provide a service to close your loan will charge. ALL LOANS have these fees, whether illustrated or not, or called something different.
CLOSING COSTS FOR YOUR MORTGAGE
MORTGAGE BROKER / BANK
- 1 % Loan Origination Fee: Gathers loan documentation, completes loan application, reviews lender guidelines, finds lender for your loan, coordinates entire loan process with all parties involved from start to finish.
- 0% Loan Origination Fee: You may have a “no origination fee” loan by accepting a higher-than-market interest rate, (usually .250% for 30 yr fixed rate loans and .500 for adjustable rate loans) than if you pay the 1% loan origination fee).
- Discount Points: May be charged to “buy-down” the interest rate from current market rates.
- Underwriting, Document Preparation fee: Charged to approve your loan, issue a formal loan commitment and prepare all of the documents you will be signing at the close of escrow.
- Processing Fee: Charged for verifications of employment(s), residence address(s), sufficient funds to close the loan, review of lending guidelines, credit report, calculation of debt ratios, and data input.
- Flood Certification: The 100-year flood zone map is researched for your property & a report is prepared.
- Wire Fee: A bank charge to wire funds to pay-off the seller’s mortgage loan.
- Funding Fee: The lender’s Funding Department works with the Title Company to balance all escrow figures and satisfy all final loan conditions.
- Tax Service Fee: Fee paid to an independent company to report changes in property taxes to the lender and to add your name to the County tax rolls in which your property is located.
TITLE COMPANY FEES
- Preliminary Title Report: A report showing liens, judgments, easements, mortgages & other information pertaining to your property.
- Title Insurance Policy: Insures your property from liens, judgments and other claims that might arise in the future on your property.
- Escrow Fee: An administrative fee to set up an escrow account to handle the refinance transaction, to guide the borrowers through the close of escrow process, to notarize all documents and to follow-up with the county to see that the new Deed of Trust gets recorded.
- Messenger Fees: To courier lending documents back and forth to the Lender and the County.
- Recording & Assignment Fees: Charged to record & assign the Deed of Trust in your name at the County Real Estate Assessor’s Office. The amount of this charge depends on the number of pages to the Deed of Trust.
- Credit Report: To determine if your credit is acceptable to the lender. The report comes from all three major credit bureaus and a score is issued based upon your credit history.
- Appraisal: To determine that the purchase price of the property can be supported by properties of comparable value in the same geographic location as the subject property.
- Final Inspection Fee: Applies to NEW construction or when repairs are needed on a property (as required by the lender) before the loan closes. The appraiser or home inspector will inspect the repairs to insure they have been made in a workman-like manner.
- EARLY issue Title Insurance: Only applicable to NEW construction, it protects you from liens field by contractors/subcontractors against the property within 75 days after the Notice of Occupancy has been issued. The cost is approximately $200-250 per $100,000 of your loan amount.
PREPAID COSTS FOR YOUR MORTGAGE
- Prepaid Interest: Once your loan closes, “the meter starts running” and interest is due on your loan. You will be charged at closing for prepaid interest from the date your loan closes – until the end of the month in which it closes. The amount you will pay is based on your loan’s interest rate & the number of days until the end of the month. Example: Loan closes on January 20th – prepaid interest is due from 1/20 through 1/31 (12 days).
- Real Estate Taxes: If your loan closes between October 16 – June 30, you will need to reimburse the Seller for taxes already paid in advance on your property to June 30. If your loan closes between July 1 – October 15, the seller will be reimbursing you for taxes due from your closing date to October 15. If your loan has “reserves” (also called impounds), additional taxes will be needed to establish your reserve account from which future tax payments will be made as they are due. Generally, if your loan has reserves/impounds, the TOTAL amount of taxes you will need to pay at closing are 10-12 months (this includes the taxes reimbursable to the seller, if any).
- Homeowner’s Insurance: Also called “fire” insurance or “hazard” insurance. The first 12 months of insurance premiums are due at the close of escrow + if you have a reserve/impound account, an additional 3 months will be needed to establish your account.
- Mortgage Insurance: (if applicable to your loan). Monthly mortgage insurance plans will require 2 months of premiums up-front at closing. Single premium refundable mortgage insurance is financed into your loan amount and does not require any funds out of pocket at closing.