Closing costs refer to the fees that have to be paid at the time of closing or settlement. The buyer pays for some parts of the closing costs, while the seller too is responsible to pay the other fees. In real estate, there is no such thing as normal or typical closing costs. Why, because these costs vary depending on the lenders, brokers and title companies of your choice. When you request for a quote, always ask for a Good Faith Estimate. It is important to go over the GFE (Good Faith Exchange) costs with your mortgage broker so he can explain it thoroughly with you. This way, you will be prepared when you proceed to the title company for your final loan documents.
The following are considered as part of the normal closing costs for a 30-year fixed rate mortgage.
1. Appraisal Fee – is the appraised value of the property through comparison of other similar homes sold within the last six months or a year as determined by a fee appraiser.
2. Tax Service Fee – is a one-time fee from an outside company paid to provide the lender proof that you were able to pay your taxes yearly.
3. Credit Report Fee – A fee for a compilation of your creditors and their report on your credit history with them.
4. Administrative Fee – also known as the lender fee, this refers to the document preparation and underwriting undertaken by your mortgage lender. It is used to offset the expense of booking your loan.
5. Mortgage Title Insurance Policy – a policy insuring the lender lien position. It involves search of the public records on the transfer of the property and a search of the seller’s name.
6. Flood Certification Fee – this involves a third party hired to determine that the property is located in a flood zone area.
7. Recording Fee – a fee for recording the new mortgage in the public records of the local courthouse.
8. Documentary Stamps Fee – it is a state tax placed on each mortgage. The calculation is at the rate of 35 centavos for every $100.00 borrowed.
9. Survey Fee – a document showing the property’s lot lines and any building situated in the property boundary. It also includes porches, patios, fences, outbuildings, driveways among others.
10. Interest – the normal interest of your loan. It is collected from the closing day up to the end of the month where the closing happens.
Have the broker explain to you, which costs are fixed and which can change as costs tied to the loan amount or purchase price. Take note that all loans have closings fees and costs. A “no cost loan” can be acquired if you pay a higher interest rate and the mortgage broker pays the fees out of the premium that the lender pays the broker for selling at higher rate of interest. Be careful of “low ball” estimates. Always consider the term of the loan, rate and fees and the program before you decide the right loan for you.