Your lender will produce both a Loan Estimate and a closing disclosure form to verify all costs are as expected. Your share of the closing costs will need to be either wired or supplied via cashier’s check. The title company or other entity conducting the closing will tell you the required amounts. Note, not all of these fees are relevant to every transaction:
- Down payment
- Loan origination fees
- Points, or loan discount fees, paid to receive a lower interest rate
- Appraisal fee
- Credit report
- Lenders’ processing fee
- Lenders’ under-writing fee
- Tax service fee
- Insurance tracking fee
- Flood zone certification
- Private mortgage insurance premium
- Insurance escrow for homeowners insurance, if being paid as part of the mortgage
- Property tax escrow, if being paid as part of the mortgage. Lenders keep funds for taxes and insurance in escrow accounts as they are paid with the mortgage, then pay the insurance or taxes for you.
- Title insurance policy premiums
- Title search
- Title Company / Attorney fees
- Deed recording fees
- Government transfer tax
- Inspection fees—building inspection, termites, etc.
- Notary fees
- Pro-rations for your share of costs, such as utility bills and property taxes
A note about pro-rations: Because such costs are usually paid on either a monthly or yearly basis, you might have to pay a bill for services used by the sellers before they moved. Pro-ration is a way for the sellers to pay you back or for you to pay them for bills they may have paid in advance. For example, the gas company usually sends a bill each month for the gas used during the previous month. But assume you buy the home on the 6th of the month. You would owe the gas company for only the days from the 6th to the end for the month. The seller would owe for the first five days. The bill would be prorated for the number of days in the month, and then each person would be responsible for the days of his or her ownership.
Reprinted from REALTOR® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS® Copyright 2005. All rights reserved: www.REALTOR.org/realtormag