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Your monthly payments go partly to repay your loan and partly to pay the
fees for your loan, many of them relating to the closing or settlement.
Most lenders require an up-front application fee to cover their expenses
as they approve you. But, swhubbard.com doesn't. That's right - with us, it's
free to apply!
Additionally, lenders charge a loan origination fee. It's generally expressed
as a single point (a point is defined as 1 percent of your loan amount).
For example, if you were borrowing $100,000, your loan origination point
would be $1,000 ($100,000 X 1%).
The typical fees that cover the loan processing and closing are:
Lender Fees
- Origination fee
- Appraisal fee
- Credit report
- Inspection fee (newly constructed homes only)
- Underwriting fee
- Document preparation/review fee
- Tax service fee
- Mortgage insurance
Title charges
- Attorney's fees
- Title insurance
- Transfer tax (excludes refinances)
- Recording tax
Miscellaneous charges
- Property survey
- Termite inspection
Prepaid expenses
(not part of the actual cost of the loan, but included with payment)
- Prepaid interest (interest that accrues between closing and the end
of the closing month - paid in advance)
- Homeowner's insurance
- Real estate taxes
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When you apply for a loan your lender is required by law to give you a Truth-in-Lending estimate of your closing costs. This estimate is based on local practices as well as the sales agreement with the seller. Both the buyer and the seller are responsible for portions of the closing costs. Some of the costs depends on where you live and the local custom as to who pays what. The majority of the fees are in relation to the loan where the lender charges certain fees for giving you a mortgage. The RESPA (Real Estate Settlement Procedure Act) HUD-1 Statement outlines who pays what and a copy is given to the buyer at the end of the closing for his/her records. The RESPA HUD-1 is signed by the buyer, seller and closing agent. RESPA is governed by the Department of Housing and Urban development (HUD). This act was passed to help the buyer and seller and ensure an ethical transaction. There will also be costs outside the closing. These are referred to as considered payments outside closing (POC). Some general questions in regards to closing are outlined below.
