Owens & Company: What are Closing Costs

What are closing costs?

All closing costs will be listed in the Good Faith Estimate provided by the lender. To make sure you are paying the least amount of closing costs possible, it is a good idea to get estimates from at least three mortgage lenders. Keep in mind that these are only estimates and actual charges could vary.
	What are Points? There are two kinds of points:
	Discount Points
	Discount points are a percentage of the loan amount, that you pay the lender, to help lower your interest over the term of the loan. Basically, one point will lower the interest rate about 1/8th of a percentage point.
	Origination Points
	This is a fee charged by the lender for processing the mortgage loan. These points can also be expressed as a percentage of the mortgage amount.

	What makes up closing costs?
	Application Fees
	This fee is normally charged when you apply for the loan and usually is not refundable even if you are turned down or decide not to accept the loan.
	Appraisal Fees
	This fee pays for an appraisal of the home to estimate the value of the property and is usually done by an independent appraiser. This appraisal is a major factor in determining how much mortgage the lender will approve. Generally, the borrower is entitled to a copy of this appraisal once it is completed.
	Credit Report Fee
	There are three major national credit bureaus that supply lenders with information on your credit history. The fee for this service is usually $45 to $55. Back to top
	Title Search and Title Insurance
	A title search is a thorough examination of the historical records of a property. This includes deeds, court records, property and name indexes, and numerous other documents. The purpose of this search is to make sure the seller is the legal owner and that there are no liens, assessments, or other claims against the property. Although a certificate of title is issued by the company doing the title search, some things may not be discovered in the title search. Title insurance will protect against tax liens, unpaid mortgages, or other judgments missed by researching the history of the title, but it cannot protect you against fraud, forgery, defective deeds, clerical errors, or a spouse misrepresenting his marital status. Most lenders will require some form of title insurance, but this is lender's title insurance. If you want title insurance for yourself, you must purchase that policy separately.
	Survey Fees
	This is to establish the official boundaries of the property and is done to protect you against encroachment by other structures. Fees range from $225 to $350 depending on where you live and the size of the lot.
	Escrow Account
	This is an account set up by the mortgage lender in order to set aside money for things like insurance (homeowners) and property taxes that will be due after closing. It is figured as part of the regular monthly payment. Back to top
	Recording and Transfer Charges
	This is a fee that is charged to cover the cost of recording your home's purchase with government agencies .
	Lender's and Buyer's Attorney
	This fee is to pay for the Attorneys that will be preparing and reviewing all the documents needed to close the loan.
	Interim Interest
	The interest that accrues from the time of closing until the end of the month.
	This information is provided as a service to the general public for information purposes only. Check with your lender to establish actual closing costs and what is required. Back to top