When you apply for a mortgage, the lender
is required to provide you with a "Good Faith Estimate of Closing Costs." That
document explains the estimated costs that will become due at the closing. Some of those
costs, along with other common closing costs are defined below:
Application Fee: Charged by lender
to cover fixed costs associated with mortgage loan processing.
Appraisal Fee: Charged to have a licensed professional appraiser certify the value
of the home being purchased.
Closing Fee: Charged by the title company to prepare all the closing papers,
settlement sheets, warranty deed, and peroration of taxes. Usually split: 1/2 Buyer and 1/2
Seller.
Credit Report Fee: Charged by the
lender to receive a detailed copy of your credit history. The lender may only require one
credit reporting agency, or all three.
Discount Points: Each point is equal to 1% of the mortgage and used by the lender
to adjust the yield on the mortgage. The borrower can secure a lower mortgage interest
rate by paying more points. Homeowner's Insurance: At the Closing, a one year
premium must be paid in advance.
Loan Closing Fee: Charged by the lender to finalize the mortgage.
Loan Origination Fee: Usually 1% of
the loan.
Private Mortgage Insurance (PMI): When the down payment is less than 20% of
the purchase price, the lender often requires this insurance.
Recording Fee: Charged by the County Recorders Office to officially record the deed
and mortgage, and to transfer taxes.
Survey Fee: Charged for verifying the boundaries of the property being purchased.
Title Insurance: Charged for insurance that protects the lender by guaranteeing
that the property's title is without legal defects.
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