Types of closing costs

Certain areas of the country may have added closing costs, but these are the general types of closing costs you might see at closing:

Attorney's or escrow fees
Property taxes
Pre-Paid Interest
Loan Origination fee
Recording fees
First premium of mortgage Insurance
Title Insurance
Loan discount points
First payment to escrow account for future real estate taxes and insurance
Paid receipt for homeowner's insurance policy Underwriting fee
Tax service fee
Broker fee
Appraisal Fee

Property taxes may be credited to you if they are paid in the back or you may have to pay the property taxes if they are prepaid in that particular state.

Prepaid interest is the interest per day that the lender charges for using the money. For example if you close on the 10th of the month you will pay interest for aproximately 20 days (in a 30 day month) for using their money for 20 days then on the first of the following month your interest will start to accrue daily for the full month. The purpose is so that when you make your first mortgage payment you are only paying the 30 days worth of interest and some to the principal compared to paying for 50 days worth of interest if you were not to pay the prepaid interest.

Closing costs are fees associated with any real estate loan transaction.

Federal law requires the lender to disclose all reasonable fees at the origination of the loan on a 'good faith estimate' within 3 days of application.

All actual closing costs are then again disclosed on the closing documents , commonly called the HUD .

Always take your Good Faith Estimate with you to compare to the fee's on the final HUD statement. You want to make sure that there were no extra added fee's.

Recording Fees are the costs to record any documents that needed to be recorded at the county clerk's office. The most likely documents that are recorded are the mortgage agreement, the note, and the deed. Recording is often done by the title company.

The Settlement document containing the final closing costs or HUD may also be referred to as the HUD-1 or HUD-1A

Always ask for a copy of the final Hud-1 24 hours from closing to give you a chance to look through the fees and compare.

Always ask questions about any fees that you do not know what they are for, especially if you notice a big difference between the fees listed on your Good Faith Estimate and your final settlement (HUD-1) paper. Closing costs are generally broken down into a few categories: lender fees, mortgage professional fees, title fees, and state/county/city fees and pre-paid items (such as escrowing for taxes and insurance and prepaid interest). Understanding where the fees and costs are going will sometimes help to understand the necessity and reasons for some of the costs.

The closing costs usually can be broken down into three basic areas. 1) Costs from the lender 2) Costs from the broker (if any) and 3) Costs from third party service providers and government agencies.

What comparing closing cost between mortgage brokers and lenders it is also good to have the Truth N' Lending (TIL). Some lenders will have higher closing costs with a lower rate, and vice versa. The TIL will help you compare the cost the entire loan package between lenders.

It is a good idea to look at both the good faith estimate (GFE) and the truth in lending (TIL) when shopping for a mortgage.

Most closing costs are not set in stone, and are negotiable. Some closing costs may depend on which loan program you decide to go with, and or what interest rate you qualify for.

Whether or not you chose to escrow taxes and insurance is your option, and it often has an effect on the rate of the loan, so make sure to be clear to your broker on what your intentions are for payments of taxes and insurance.

On a purchase loan, the buyer can negotiate vender invoices to be included as seller closing costs to be paid out of escrow.

In most states, there are transfer taxes that must be paid at the time of a home purchase. These taxes are usually split between the seller and the buyer.

Be sure your mortgage professional explains each and every charge on your Good Faith Estimate. Many costs may be third party charges that need to be explained as well.

All of your closing cost will be provided to you by your mortgage consultant. All of the fees associated with your closing will e provided to you via G.F.E (Good Faith Estimate).

Closing costs are the amount that is paid in fees at closing by the borrower. This is in addition to the down payment.

» DISCLAIMER: The information contained in this article on 'Types of closing costs' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.