Shush…. I am not supposed to tell you that. However, you are smart and have figured this out already. Especially true, if you have bought and sold a home previously.
However, the above is the normal, and if you get the true value or (sales price) of the home you have no other choice. Unless you pay all of your closing cost out of pocket. The appraisers must be careful these days,especially since the mortgage meltdown, to make sure the value is not inflated.
The Lender Can Negotiate Loans with No Closing Cost
Lenders have the flexibility to pay closing cost on a loan. However, you will normally pay that cost with a higher interest rate over the life of the loan. Meaning the interest rate you are offered is higher than it would be if you paid or the seller paid the cost.
It is wise to ask what the interest rate would be if you or the seller paid the cost. Many people do not know to see how much the interest rate on the loan is fluctuating for this benefit. Know what is the interest would be with you paying all of the closing cost.
Note that not any lender is going to give you a free loan. That is just not the case. The lender must make money, and they will one way or the other. They are in business for a profit, and they must pay the Loan Officer for his/her work.
Closing Cost Broken Down and Lender Fees Explained
Origination Fee – This fee is usually across the board at 1.000% of the loan amount, however, is could be .500% if the lender chooses. When you use a Broker (who is the middle man), their fee can also be in the origination fee.
Discount Points – These points are for buying down the rate of interest on your loan. Discount points should only be in your Loan Estimate if you are buying down the rate. If there are discount points and you have not asked to buy-down the rate of interest, find out why and have them removed.
Example: The rate quote for today is 4.750%, you want a 4.500%, they will charge discount points to give you the rate you desire.
Underwriting Fee – This fee is something like $300 – $650 +-and the amount depends upon the lender. This is a lender charge for underwriting, approving your loan.
Processing Fee – This fee is a lender fee for processing your file (gathering all of the documentation), and can be a fee of $300 -$650+- also.
Courier Fees – Administration – $100
Rate Lock Free-Application $200 – $500 +-
Fees Paid to Third Parties
Appraiser Fee – $500 + – depending upon the depth of the appraisal- the type -construction appraisal, number of units, single-family or multi-family, or rental appraisal, etc.
Credit Report – $25 for each person +-
Loan Closing Expense- Closing Attorney Fees – Title Insurance
The Closing Attorney or Closing Agent represents the seller, the lender, and you the buyer. It is their duty to provide sound, accurate, and pertinent information about the subject property without any discrepancies. However, humans make mistakes, now and then.
Per Title Penguin for 2018 the average title policy for lender was – $544 and owner’s policy $830.
The Closing Attorney interacts with the Title Insurance Company. They do the title examination, making sure the title is free of liens, no other people are on title, (this has happened), no encroachments, all legal land issues are intact.
Additional Attorney Fees Included
The Attorney will record the mortgage/deed of trust and those fees are $100-250 +-
Tax service fee of $50 +-
Notary Fees $100
Closing Protection Letter – $50
All of the latter is in conjunction with closing the loan/attorney/title insurance.
Survey * $500+ this can be expensive and if you do not have a copy of one that has been done recently or is not on file, you would need to know the property lines.
The attorney draws up the documents with the terms of the loan that have been approved per the lender. The note, mortgage, any closing disclosures, and has a title binder at closing. The original title policy is delivered after loan closing and then sent to the lender.
The duty of the Closing Attorney is to make sure the title is free of liens, no other people are on title, (this has happened), no encroachments, all legal land issues are intact, and provides the insurance coverage.
Title Insurance Policy– Up to $1,000
Owner policy – this policy is for the applicants benefit and gives you information that you may need down the road. It includes the same information as above.
Lender Policy – this one is required as this includes all pertinent information about the property, prior loans, prior owners, liens ,taxes, encroachments, and all property standards.
Title insurance insures the lender, and buyer from defects in the title that could occur.
A Title Insurance Company can close loans- see further information in Title Attorneys and Title Companies. Title insurance insures the lender, and buyer from defects in the title that could occur.
Escrow Items
– closing you must pay
Interest that will accrue from – when the loan is closed until the end of the month.
Homeowners Insurance – 12 month policy
Homeowner’s association fee – (if property is a condo or PUD).
Flood Insurance – if the property is in a flood zone
Property taxes – depending upon what is due, plus escrow amount needed
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