Buyer, Real Estate
When budgeting for a home closing costs can be overwhelming and, sometimes, overlooked. It is crucial that you consider these costs and incorporate them into your budget when buying a home. Your lender should be transparent and can provide a realistic estimate for you.
According to a recent survey done by Zillow, typically home buyers will pay between about 2 to 5 percent of the purchase price of their home in closing fees. On average, buyers pay roughly $3,700 in closing fees.
Following you will find some examples of what you can expect for closing costs
Loans for a home loan come from either a mortgage company or a private bank.
Most of your closing costs will be allocated to them, because they do most of the heavy lifting for you.
These fees within the fee can include an origination fee, mortgage broker fee, discount fee, processing fee, underwriting fee, application fee and finally a lock-in fee.
I guess we should start at the beginning. This origination fee covers the lender taking you on as a client. This fee can vary and be weary if they wave this costs – because it most likely will be hidden elsewhere – (higher rate, higher processing fees etc.)
MORTGAGE BROKER FEE:
This fee is charged by mortgage brokers, which are companies that do not lend money but shop various lenders for the best deal. You should never be charged both a mortgage broker fee and an origination fee.
Hey – a discount sounds good! You can get a discount on your loan rate – but first you have to pay up. The discount fee is used to directly lower your rate. Unlike the origination fee, the discount fee may not go to the lender as profit. It has to be used to give you a lower rate.
Keep in mind, it may not be worth paying a discount fee upward of 1%.
The bait and switch. Your loan officer with most likely pass your loan application off to a loan processor who will mange the collection of documentation and anything else in order to close your loan.
The underwriting fee is to get the final seal of approval on your application.
This is up to you if you are ready to commit to a lender. If you are still shopping around, we wouldn’t recommend paying this, unless you are willing to never see that money again. If you are confident in moving forward with your lender then paying an upfront fee for the application is typical.
In order to lock in the rate for a loan you may need to pay a fee.
CREDIT REPORT FEE:
Naturally, your lender will run credit report when applying for a loan. The scores on this report will dictate your rate.
Today more than ever FEMA is clearly defining whether your home is in a flood zone or not. (Hello Miami!) If you are in a flood zone the lender has to ensure that that the home is applicable for flood insurance. This is mandatory in order for your to get the loan.
TAX SERVICE FEE:
The lasting you need is for your new home to be seized due to past taxes not being paid. This fee will cover the assurance that all tax liens have been paid on the home.
Third Party Fees
Typically these fees are allocated to any third party involved in the closing, for example the appraiser.
Appraisers will determine the value of the home that your lender will use for qualification.
No one wants a home that comes with pesky critters. We recommend you do this prior to closing, even if it isn’t required. Treating your home for termites or rodents could become costly. Would also be a good idea to know the history, if the homes needs treatment regularly.
TITLE REPORT/TITLE INSURANCE:
Here a title company will research all past claims on the home to ensure the title is “clear”, meaning no one can come claim a right to the home. They also issue insurance in case they missed something. Check with your lender to see if this fee should be covered by the seller or the buyer. We buy houses West Sacramento CA.
There is a fee for the escrow company. The escrow company is responsible for ensuring that all transactions including money are done accordingly. They also manage the signing of all documents and required notarization.
A survey of the land and property lines are often needed.
Depending on the state, an attorney may be required .
These fees will be based on where the home is, and vary per county.
The county keeps a record of each time a home is sold for tax purposes.
When a home and or mortgage transfers from one owner and mortgage company to another, there is a significant transfer tax associated with that.