Whether you’re purchasing or refinancing a home, there is something called “closing cost”. Since closing costs differ based on location, property and loan type, it is important that the borrower receive an estimated amount they’ll be paying to determine what they can actually afford.
Good News! Here at New Dwelling Mortgage, we don’t charge any Application Fee, Credit Report Fee or Processing Fee.
What are Closing Costs?
Closing costs are the expenses, over and above the price of the property, that buyers and sellers normally incur to complete a real estate transaction. Costs incurred may include loan origination fees, appraisal fees, title searches, title insurance, surveys, mortgage tax (depending on state), mortgage insurance, deed-recording fees and credit report charges. Prepaid costs are those that recur over time, such as property taxes and homeowners’ insurance. The lender is required by law to state these costs in a “Loan Estimate“ within three days of a home loan application.
BREAKING DOWN Closing Costs
Closing costs occur when the title of the property is transferred from the seller to the buyer. The total dollar amount of closing costs depends on where the property is being sold and the value of the property being transferred. Home buyers typically pay between 3% to 5% of the purchase price, but closing costs may be paid by either the seller or the buyer.
Appraisal fee: It’s important to the lender to know if the property is worth as much as the amount being borrowed. A lender needs to verify that the amount you need for a loan is justified, the lender also wants to make sure it can recoup the value of the home if you default on your loan. The average cost of a home appraisal by a certified professional appraiser ranges between $450-$700.
Application fee: This covers the cost of processing your request for a new loan which includes administrative expenses. The application fee varies depending on the lender.
Credit report fee: In order to obtain a loan, lenders want to know your credit history. As a result, a credit report is routinely pulled by the lender and paid for by the home buyer. According to the Consumer Financial Protection Bureau (CFPB), credit report fees are typically less than $35.
Flood certification fee: Lenders want to know if the property you are purchasing is in an area prone to flooding. If it is, expect to pay flood insurance as well. The flood certification fee is typically between $12 to $25.
Tax service fee: The lender needs to know that the property taxes are being paid in full and on time to avoid a tax lien. This fee certifies that you have paid your own property taxes and is assessed by the town or county, and can cost between $75 to $98.
Underwriting fee: Underwriting fees are those associated with an underwriter reviewing your application and determining if the lender is willing to provide you with a loan and under what terms.
Attorney fees: You may also have to pay an attorney to process and review your loan documentation depending on the state you’re in. Attorneys fees range from $1,000 to $1,200 depending on location.
Title fees: A title company makes sure the property you are buying is free of anything that could affect your ability to take ownership. A title search is conducted to ensure that the person selling the house actually owns it and that there are no outstanding claims or liens against the property. You will pay lender’s title insurance, owners title insurance, municipal searches, title endorsement fee, notary and courier fees associated with having your final documents signed, and recorded to transfer ownership.
Escrow Payments for Property Taxes and Insurance
Escrow payments are used to pay for expenses like property taxes and various types of insurance coverage you may have, like homeowners insurance, flood insurance, and mortgage insurance. These payments are added to your monthly mortgage amount and will be calculated using documents from your closing, insurance company and local tax office. This cost will vary depending on the property taxes in your area and the insurance coverage that you have. It is also important to note that this amount is subject to change from year to year as property taxes and homeowner’s insurance rates rise or fall.
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