As a buyer, you’ll likely be responsible for a variety of fees and expenses that you and the seller will have to pay at the time of closing. Your lender must provide a good-faith estimate of all settlement costs. Your attorney conducting the closing will tell you the required amount for:
- Down payment
- Loan origination – This covers the lender’s administrative costs. It’s usually about 1 percent of the total loan but you can sometimes find mortgages with no origination fee.
- Points, or loan discount fees, which you pay to receive a lower interest rate
- Home inspection – You will likely get your own home inspection to verify the condition of a property and to check for home repairs that may be needed before closing.
- Appraisal -This is paid to the appraisal company to confirm the fair market value of the home.
- Credit report – A Tri-merge credit report is pulled to get your credit history and score. Your credit score plays a big role in determining the interest rate you’ll get on your loan.
- Private mortgage insurance premium – If you’re making a down payment that’s less than 20% of the home’s purchase price, chances are you’ll be required to pay PMI. If so, you may need to pay the first month’s PMI payment at closing.
- Insurance escrow for homeowner’s insurance, if being paid as part of the mortgage – Often you are asked to put down two months of property tax and mortgage insurance payments at closing.
- 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.
- Attorney Fee: This pays for an attorney to review the closing documents on behalf of the buyer or the lender. This is not required in all states.
- Title insurance policy premiums
- Deed recording
- Prorations for your share of costs, such as utility bills and property taxes
- Home Owners Association Transfer Fees: The Seller will pay for this transfer which will show that the dues are paid current, what the dues are, a copy of the association financial statements, minutes and notices. The buyer should review these documents to determine if the Association has enough reserves in place to avert future special assessments, check to see if there are special assessments, legal action, or any other items that might be of concern. Also included will be Association by-laws, rules and regulations and CC & Rs.
Your lender will give you a Loan Estimate for your loan, which will include what the closing costs on your home will be, within three business days of receiving your completed loan application