Understanding Closing Costs

Common closing costs and fees that you may expect are:

Loan Origination Fee: a percentage of the mortgage, charged to set up and evaluate the loan application
Credit Report Fee: requested by the lender in order to evaluate your loan application
Appraisal Fee: used to obtain an independent appraisal of the home to be mortgaged; the appraisal is a factor in determining the amount the lender will loan
Title Search Fee: charged for a detailed search of the historical records related to a property to ensure that the seller is legal owner, that there are no liens, restrictive covenants, outstanding judgments or other claims against the property
Title Insurance: often required by the lender for protection against hidden title defects; a lender’s policy only protects the lender – a buyer may also opt to purchase an owner’s title insurance policy
Discount Points: optional payment to lower the interest rate
Recording and Transfer Fees: a fee charged to cover the paperwork to record the home purchase and transfer ownership
Pre-Paid Interest: interest from the closing date to the end of the month generally charged to the buyer
Property Taxes: buyer’s prorated portion of state and local government property taxes already paid by the seller
Escrow Account Payments: often required by the lender. Charges to cover costs or payments which will be due after the closing; escrow accounts are often setup to continue for the life of the loan, where a specified portion of the mortgage payment goes into escrow to cover certain ongoing property related expenses and payments such as taxes and insurance

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