Closing Cost Estimate
A few days after completing your loan application, you will receive a Mortgage Loan Disclosure Statement and a Truth-In-Lending form. You will also receive a set of the same forms directly from the lender we are targeting for your loan. The key information on these forms is the list of estimated closing costs.
Origination Fees.
Often called "points" or "loan discount", points are a one-time charge used to lower the interest rate. For example, if you want a 30 year fixed rate at 0 points, the rate might be 5.5%, but if you pay 1 point, the rate would drop down to 5.25%. One point is equal to 1% of the loan amount. This is literally the price charged for a particular loan. Points are a form of prepaid interest, and are fully tax deductible in the year paid.
Should I Pay Points?
Appraisal Fee. This is a one-time fee for an appraisal -- a statement of property value -- for the lender. The appraisal is ordered either by our company or by the lender, depending on the type of loan. The fee starts at $300 for a single family home.
Credit Report Fee. This fee is currently $19.50 for a basic credit report.
Escrow Fee. This is a one-time fee charged by the title company to administer your escrow. This includes a title search, title report, the coordination of buyers and sellers funds, paying off loans on the property, making sure you take clear title to the property, and making various payments to third parties such as appraisers.
Title Insurance Fees. There are two title policies that you will be purchasing — a lender's title policy —ALTA — which protects the lender against loss due to defects on title, and a buyer's title policy — CLTA — which protects you from title defects as long as you own the home. These are both one-time fees, although, if you refinance in the future, you will need to purchase a new lender’s policy.
Miscellaneous Title Charges. The title company may charge fees for recording the deed of trust, document preparation, notary, email receipt of loan documents. These are all one-time charges and are fairly minimal.
Lender Underwriting Fee. Depending on which lender is selected, these fees generally range from $450 to $995, and include processing and underwriting your file, reviewing the appraisal and credit report and other documentation and preparing your loan documents. Lenders will typically re-verify your credit and employment status immediately before closing.
Prepaid Interest. Depending on the date your transaction closes, this charge varies. If your loan closes at the beginning of the month, you will probably have to pay the maximum amount of prepaid interest. If your loan closes at the end of the month, you will only have to pay a few days' interest. Either way, this is a tax deductible item.
Taxes and Hazard (Fire) Insurance. Depending on when you close, you may be required to reimburse the seller for property taxes already paid. In addition, you will also need to pay an entire year's fire insurance premium up front. Any property taxes you pay in escrow are tax deductible.
