Coldwell Banker Countryside, Realtors

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Below is a summary of costs you may have to pay when you buy a home. There are two kinds of closing costs. Non-recurring closing costs are paid once and recurring closing costs are paid over the course of home ownership, such as property taxes and homeowner’s insurance. Some of the items below do not normally appear on a Good Faith Estimate and lenders are not required to show all of these items.  The fees can vary depending on the lender, the location of the property and whether the home is new construction or an existing home. Also the fees are somewhat lower for cash transactions. E-mail me for free Excel worksheets that you can use to qualify yourself for a mortgage loan and to estimate the closings costs and monthly payments. Contact me for more information.

Loan Origination Fee – The loan origination fee is often referred to as "points." Points are up-front mortgage interest fees paid on a loan to reduce the interest rate. One point is equal to one percent of the mortgage loan. For example, paying one point on a loan will generally lower the interest rate on that loan. Therefore, paying points is a trade off between paying money now versus paying money later. Keep in mind, points are often used for the mortgage broker's commission. On a VA or FHA loan, the loan origination fee is one point. Anything in addition to one point is called "discount points."

Loan Discount – On a government loan, the loan origination fee is normally listed as one point or one percent of the loan. Any points in addition to the loan origination fee are called "discount points." On a conventional loan, discount points are usually lumped in with the loan origination fee.

Appraisal Fee – Since your property serves as collateral for the mortgage, lenders want to be reasonably certain of the value and they require an appraisal. The appraisal is to determine if the price you are paying for the home is justified by recent sales of comparable properties. The appraisal fee varies, depending on the value of the home and the difficulty involved in justifying value. Unique and more expensive homes usually have a higher appraisal fee. Appraisal fees on VA loans are higher than on conventional loans.

Credit Report – As part of the underwriting review, your mortgage lender will want to review your credit history. An in file (preliminary) credit report can be as little as $7, However, a full factual credit report normally runs between $60 and $70. The type of credit report required varies by lender and loan program.

Lender’s Inspection Fee – You normally find this on new construction and is associated with what is called a final inspection. Since the property is not finished when the initial appraisal is completed, the final inspection verifies that construction is complete with carpeting, flooring and appliances installed.

Processing/Mortgage Broker Fee – About seventy percent of loans are originated through mortgage brokers and they will sometimes list your points in this area instead of under Loan Origination Fee. They may also add in any broker processing fees in this area. The purpose is so that you clearly understand how much is being charged by the wholesale lender and how much is charged by the broker. Wholesale lenders offer lower costs/rates to mortgage brokers than you can obtain directly, so you are not paying "extra" by going through a mortgage broker.

Tax Service Fee – During the life of your loan you will be making property tax payments, either on your own or through your impound account with the lender. Since property tax liens can sometimes take precedence over a first mortgage, it is in your lender’s interest to pay an independent service to monitor property tax payments. This fee usually runs between $70 and $80.

Flood Certification Fee – Your lender must determine whether or not your property is located in a federally designated flood zone. This is a fee usually charged by an independent service to make that determination.

Flood Monitoring – From time to time flood zones are re-mapped. Some lenders charge this fee to maintain monitoring on whether this re-mapping affects your property.

Other Lender Fees – Junk Fees - These fees vary widely from lender to lender. These fees generate income for the ultimate lenders and are used to offset the fixed costs of loan origination. You will normally find some combination of these fees on your Good Faith Estimate and the total usually varies between $400 and $700.

Document Preparation – Before computers made it fairly easy for lenders to draw their own loan documents, they used to hire specialized document preparation firms for this function. This was the fee charged by those companies. Nowadays, lenders draw their own documents. This fee is charged on almost all loans and is usually in the neighborhood of $200 - $300.

Underwriting Fee –This is the ultimate lender’s cost of underwriting a loan package. This fee is usually in the neighborhood of $175 to $350.

Administration Fee – If an Administration fee is charged, you will probably find there is no Underwriting Fee. This is not always the case.

Appraisal Review Fee – Even though you will probably not see this fee on your Good Faith Estimate, it is charged occasionally. Some lenders routinely review appraisals as a quality control procedure, especially on higher valued properties. The fee can vary from $75 to $150.

Warehousing Fee - This is rarely charged. However, some lenders have a warehouse line of credit and add this as a charge to the borrower.

Pre-paid Interest – Mortgage loans are usually due on the first of each month. Since loans can close on any day, a certain amount of interest must be paid at closing to get the interest paid up to the first. For example, if you close on the twentieth, you will pay ten days of pre-paid interest.

Homeowner’s Insurance – This is the insurance you pay to cover possible damages to your home and other items. If you buy a home, you will normally pay the first year’s insurance when you close the transaction. If you are buying a condominium and in some cases a townhouse, your Homeowners’ Association Fees may cover this insurance under a Master Policy. You still need to insure the interior of your unit and your belongings separately.

VA Funding Fee – On VA loans, the Veterans Administration charges a fee for guaranteeing your loan. If you have not used your VA eligibility in the past, this is two percent of the loan balance. If you have used your VA eligibility before, it is three percent of the loan. If you are refinancing from a VA loan to a VA loan, it is three-quarters of a percent of the loan amount. Instead of actually paying this as an out-of-pocket expense, most veterans choose to finance it, so it gets added to the loan balance. This is why the loan balance on VA loans can be higher than the actual purchase amount.

Up Front Mortgage Insurance Premium (UFMIP) – This is charged on FHA purchases of single family residences (SFR’s) or Planned Unit Developments (PUD’s) and is 2.25% of the loan balance. Like the VA Funding Fee it is normally added to the balance of the loan. Unlike a VA loan, the homebuyer must also pay a monthly mortgage insurance fee, too. This is why many lenders do not recommend FHA loans if the homebuyer can qualify for a conventional loan. However, condominium purchases do not require the UFMIP.

Mortgage Insurance – though it is rare nowadays, some first-time homebuyer programs still require the first year mortgage