The amount you borrow to actually buy your house is one thing; the fees required to close the transaction are quite another, and they amount to from 3 to 5 percent of your loan amount depending on when you close on your home.
At the real estate closing, you will be given a stack of paperwork that shows the loan fees line-by-line. (You should already have seen these fees estimated in your "Good Faith Estimate", but they might vary.) The fees below are generally what will be required, but every buyer will not pay every fee listed. For example, maybe you worked a deal with the seller to pick up part of the closing costs. And there are many geographic differences. Finally, all lenders do not charge every fee shown.
Commissions: Payment for the work real estate agents have done. Traditionally it is 6% of the sales price split between buyer and seller agents; usually 3% to buyer's agent, 3% to seller's agent. The seller usually pays these. Note: These costs are not included in your lender's Good Faith Estimate.
General Loan Fees
Appraisal fee: The lender hires an independent appraiser to determine whether the property is worth the sales price you've offered for it. Expect $300-$400. It can be higher or lower, depending on the size of the property and appraisal fees in your area. Investment property appraisals run higher as more forms of information is required by the lender.
Credit report fee: Covers obtaining a credit report to determine whether you are an acceptable credit risk. It averages about $25 per credit report checked. This report also includes your credit scores.
Interest: Most lenders require the buyer to pay the interest that will accrue on their loan from the date of settlement to the first monthly mortgage payment due date.
Lender's inspection fee: If you are building a new home or buying a home that's under construction, the lender may charge an inspection fee, usually under $100. This pays for an inspection by the lender or outside inspector of your house or property.
Loan origination fee: Fee for establishing a new loan. It is paid to the lender for originating the loan. The fee usually varies from 0.5% (half a point) to 2% (two points) of the loan amount.
Loan discount points: Refers to a one-time charge imposed by the lender or mortgage broker to lower the interest rate and therefore the monthly mortgage payment. The more points paid up front, the lower the interest rate. The loan discount is also called "point" or "discount point."
Mortgage broker fee: Paid to a mortgage broker, typically in a commission based upon the amount borrowed. Same as Origination fee.
Mortgage insurance premium: Some lenders require borrowers to pay their first year's mortgage insurance premium up front. Other lenders ask for a lump sum insurance premium payment at closing that covers the life of the loan.
Processing fee: Charged by the lender to cover costs associated with the processing and closing of a mortgage loan.
Escrow Account set up / Reserve account funds: Your monthly mortgage payments are likely to include a pro-rated amount to cover payments for property taxes and homeowners insurance. This money is held in a "reserve" or "escrow" account by the lender who makes the payments for you. At closing, your lender may require you to advance just to be sure the reserve fund has enough money to pay the bills.
Tax-related service fee: Paid to set up a service which identifies the payment due date of local taxes for the servicer of the loan.
Underwriting fee: Covers the final analysis and approval of the mortgage; often the lender's cost to the investor that will subsequently purchase the loan.
Wire transfer fee: Covers the cost of wiring the money around, which is usually done by escrow.
Insurance and Taxes
Annual assessments: If you will have annual assessments made by your condominium or homeowners association, you will have to pay two months' up front.
Flood insurance premium: Lenders may require flood insurance, with the premium paid at closing, depending on the property location.
Homeowners insurance premium: A homeowners insurance policy protects the lender (as well as the owner) against loss of the house from fire, wind, or other natural disasters. Usually the buyer pays one year’s premium payment at closing.
Taxes: Buyers pay two months' worth of city property taxes and two months of county property taxes at closing. This depends on your area.
Title Charges
Attorney fees or closing fees: Varies, but could be $200 to $500 or more. In some parts of the country an attorney, not a title company, handles closing, and sometimes an attorney is hired by the lender to review certain documents.
Notary fees: Pays for the notary public who witnesses that the signatures on closing documents are made by the people named in them. Not typically used in Florida.
Title insurance fees: Average is $350, but could be as high as one percent of the loan. Title insurance is a policy that protects the owner and/or lender by guaranteeing the title to the property is clear.
Title search & Exam: About $50-$100. A search is done to make sure there aren't any unpaid mortgages or tax liens on the property.
Government Recording and Transfer ChargesCourier fee: Charged if a courier picks up and delivers documents.
Pest inspection: Depending on location, a termite or other pest inspection may be required.
Recording fees: Average for Florida is about $180. This covers getting the sale recorded in the public record.
Survey: About $300-$400 for a survey of the property boundaries. Depending on the size of the lot.
So you see, it's more than just the down payment. You will need additional funds for closing costs that add up if not negotiated in your sales contract with the seller.
Don't let the costs scare you out of buying a home...NOW is the best time to buy! Rates are low, home prices are the best since property values have come down. Don't miss out and stay on the fence. Your dream home could be waiting for you right now!
321-243-4917 People's First Financial Services, Melbourne, FL
Posted by JoAnn Young
