Costs of Getting a Home Loan
When you get a home loan, there will be quite a number of people and organizations that will go to work for you to provide services necessary to complete the process. The services and amounts can vary quite a bit from state to state.
Of course, the lender will be paid for its services, as will the title company, the appraiser, the pest inspector, the courier, the mortgage insurance company (if applicable), and so on. In addition, most states will collect taxes on your transaction:
In addition, you will have to arrange for hazard (home) insurance and flood insurance if your home is in a flood zone. And in most cases the lender will require that an escrow account be set up to pay future tax and hazard insurance bills.
Below is a list of services and typical estimated costs associated with each. These are “closing costs”. Some of these charges are a flat amount while some are a function of the size of loan you are obtaining.
|
Processing
|
150
|
|
Underwriting
|
200
|
|
Loan Documents
|
150
|
|
Tax Service
|
78
|
|
Flood Certification
|
25
|
|
Courier
|
30
|
|
Appraisal
|
275
|
|
|
Credit report
|
60
|
|
Title Insurance
|
300 and higher
|
|
Title Endorsements
|
75 and higher
|
|
Title Settlement Fee
|
50
|
|
Recording
|
60
|
|
Pest Inspection
|
50
|
|
State taxes
|
Varies by state
|
|
The first five items in the list above are considered “Lender Fees”. The other items are “Third Party Fees” – fees made by other firms in your behalf. Lender fees will very by lender and they may be called by different names. But if the total lender fees are much higher than those shown here, you might want to ask about them.
In some states it is customary (or even required) to have representation by an attorney. Of course, their fees would be added to the figures above. Sometimes attorneys take on some or all the title companies responsibilities, reducing those charges.
The “prepaid items” are amounts that will be paid to prepay interest and insurance and to establish an escrow account for taxes and insurance. Typical figures are listed below.
|
Prepaid Interest
|
1 to 31 days interest
|
|
Hazard Insurance
|
First year’s premium
|
|
Flood Insurance
|
First year’s premium
|
|
Tax Escrow
|
2 to 8 months
|
| Insurance Escrow
|
2 months
|
|
Mortgage Insurance
|
2 months
|
When you apply for a home loan, your loan officer will give you a “Good Faith Estimate of Closing Costs”, a federally mandated form that will summarize an estimate of your costs.
There are ways that buyers and people refinancing an existing mortgage can roll the costs of obtaining a new loan into the new loan itself, avoiding the need to pay the fees out of pocket. Or the lender may pay the fees for you (resulting in a somewhat higher interest rate). Talk to your loan officer about this.
|
