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Closing Costs Demystified

 
 


Closing costs is a term that covers a wide range of charges that a buyer and a seller need to bring to the closing table.  

Lender Fees Include

  • Loan origination fees - This is a charge from the bank to process the loan
  • Discount Points - Points are a percentage of the loan amount that are used to buy down the loan.
  • Appraisal - This is a valuation of the property by a licensed appraiser used by the bank to provide the value of the property.  The bank will not loan more than the amount of the appraisal.
  • Credit report

 

Miscellaneous Closing Costs

  • Underwriting fee - Charged for underwriting the loan
  • Flood Certification - It is required by Federal law that it be determined whether a property is in a flood zone.  If this is the case it would be a requirement for the buyer to obtain flood insurance.
  • Tax Service - A one time charge for setting up an alert with the tax service company so that the lender will be notified when property taxes increase in the city or county thus requiring a change in the amount held in escrow for payment of taxes.

 Attorney's Fees Include

  • Examining the title to make sure that there are no liens and that past transfers are in order
  • preparing the title insurance binder
  • Fee from the title company for preparing documents
  • Lenders insurance - to cover the loan amount in case title has not been properly transfered
  • owners insurance coverage - covers buyer for their downpayment and any equity in the home.  also includes coverage protecting buyer from any mechanic's liens.
  • miscellaneous closing costs

County and State Fees

  • Grantor's tax - This is a transfer tax.
  • Recording fees
  • City/County tax
  • State tax stamp
  • Survey

Prepaids

  • Real estate tax escrow
  • Home Owners Association Fund - 3 months is required
  • Hazard Insurance - 12 months required

Interest to the end of the month


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