Every home sale incurs fixed costs. Buyers and sellers usually share these costs, as specified in the sales contract.
Many of the costs associated with buying a house are associated with getting the loan. At STELLAR mortgage corporation, we have extensive experience in mortgage lending, so we can provide you with a comprehensive list of mortgage-related costs in your “Loan Estimate”.
Loan Estimates (LEs)
Soon after you apply for a loan, we will give you the “Loan Estimate” of your closing costs. The closing costs specified are estimated based on STELLAR mortgage corporation’s experience with mortgage loans, but costs often vary by small amounts between delivery of the LE and closing. We field questions about these costs every day at STELLAR mortgage corporation, so don’t hesitate to contact us if you have questions.
We’ve provided a general list of closing costs below, but we will give you a specific list of closing costs, with amounts, soon after you complete your loan application. At STELLAR mortgage corporation, we don’t believe in surprises, so if your costs change, we will be sure to let you know immediately.
Standard Closing Costs
- Loan Origination Fee – This covers the administrative expenses in setting-up and processing the loan. The loan origination fee may be a percentage of the mortgage amount or a flat fee.
- Underwriting Fee – This might also be known as an Administration Fee or a Loan Origination Fee.
- Points (optional) – An option for the home buyer is to pay points to lower the interest rate at which the loan will be repaid. Each point equals 1 percent of the mortgage amount. For example: on a $150,000 loan, 1 point would equal $1,500.
- Appraisal Fee – The fee for having the house appraised may be incorporated into the closing costs or payment may be required by the lender at the time the loan application is submitted.
- Credit Report – The lender uses a credit report to determine the creditworthiness of the loan applicant. This fee is often paid when the loan application is submitted.
- Condominium or Planned Unit Development Review – This is commonly known as as “condo” or PUD” questionnaire. It is a compilation of information regarding the Association in which the property is located. It contains information regarding ownership, financials, insurance coverage and pending litigation or assessments.
- Closing Agent Fees – Depending on your State, you will close with an Attorney, a Title Company or a Escrow Company. While there are some variations in local customs and practices, their roles are to ensure that clear title provided to the buyer, a perfected security interest is provided to the lender, that all receipts and disbursements of cash are properly accounted for and that all documents are properly executed and recorded.
Government Fees
- Recording Fees, Deed, Mortgage and Note Taxes. These fees are mandated by statute, in the city, county, or state in which the property is located. While the formula for calculation may vary by jurisdiction, it is the same formula for every borrower.
Prepaid Items
- Interest Payment – Typically the buyer is required to pay interest on the mortgage loan to cover the time between the closing date and when the first mortgage payment period begins. For example: If closing is on May 15. Your first monthly payment begins to accrue interest on June 1 with your first mortgage payment due July 1. At closing an interest payment covering the accrual period between May 15 and May 31 may be required.
- Insurance – For most 1-4 family purchases, the buyer must make payment for 1 full year of insurance at or before closing.
Escrows/Impounds
At closing a payment may be required to fund the escrow account if the lender is paying home insurance, property taxes and/or other expenses out of the escrow account.
Property Taxes
- Property Taxes – This is the one closing cost that is often prorated between the buyer and seller. If the seller has already paid the annual property taxes, the buyer typically reimburses the seller for the period in which the buyer will be occupying the property. Likewise, if the taxes have not yet been paid, the seller typically reimburses the buyer for the period in which the seller occupied the property.
- Transfer Taxes and Recording Fees – This is the cost for transferring ownership of the property and recording the purchase documents. The fee is often calculated as a percentage of the sales price.
Insurance
- Hazard – Typically, this is known as Homeowner’s Insurance. It is required for all improvements to the property, whether a single-family home, a townhome, or a condominium.
- Flood or Earthquake Insurance – These forms of insurance may be mandatory or optional, depending on the location of the property and lender requirements.
- Private Mortgage Insurance (PMI) – This insurance, required on loan for more than 80% of the property’s value ( and for any FHA loan, regardless of loan to value), insures the lender against losses due to borrower default.
- Title Insurance – This insurance is provided for lenders on each loan and for buyers/borrowers, it is optional. Lender’s title insurance protects the lenders’ security interest in the property while the loan is outstanding. Owner’s title insurance protects the owner’s equity interest in the property.
Confident, now, that You’re in the right place? Hope so!