Closing cost... What are they?

What are closing costs?
Closing costs are the fees and pre-paid items related to funding your home loan. Closings costs can include the following items:

TYPICAL FEES

• Real Estate Agents Commissions
  Usually a percentage of the home's price (if purchasing a home)
• Origination fee
  The fee charged by the lender to process your loan
• Loan Discounts or Points
  If you elect to "buy down" your rate you pay points at closing. One point is equal to 1% of your loan amount.
• Appraisal
• Title Insurance
  The title insurance policy you are required to purchase protects the lender. To issue title insurance, government and other records must be searched to make sure no one else has a legal claim to the home.
• Escrow Fees
  These are fees from the title company charged to process your loan documents and act as a neutral third party.
• City, County and State Charges
  The local governments where you live may charge taxes and fees to record and stamp documents such as deeds and loan paperwork.
• Pest Inspection
  The terms of your contract or requirements from the lender require it, a pest inspection and report may need to be done.

PREPAID COSTS COLLECTED AT CLOSING BY YOUR LENDER

• Interest
  If you loan is finalized before the last day of the month, at closing you must pay a daily pro-rated interest for the remainder of the month.
• Homeowners' Insurance
  You must pay for your annual policy in advance to protect the lender and you in case your property is damaged. Supplemental coverage such as flood, earthquake, etc. may be required by the lender depending on the location of the property.
• Private mortgage insurance
  Generally speaking if your down payment is less than 20%, lenders require this policy in order to protect themselves if can not repay your loan. You can avoid this expense by putting a first and second mortgage in place. Ask us how!
• Reserves for impound accounts
  You can elect or the lender may require this account to be set up to pay your annual property taxes, homeowners insurance, flood insurance, private mortgage insurance. A portion of your monthly mortgage payment is used to fund this account so the above mentioned bills can be paid.

Understanding what you are looking at when reviewing your Good Faith Estimate will help you to ask the right questions!