What costs should I expect at the loan closing?
At the loan closing, you will be required to pay your down payment and other various closing costs and fees. Most of the closing fees are paid by the buyer, but some of the fees are prorated, by date, to the seller and the buyer.
The only fee that can be collected at the time of application, by federal law, is the credit report fee. The appraisal fee cannot be collected until the borrower has received the Lender’s Estimate and notified the lender that he or she has chosen to proceed with the application. Certain fees vary from lender to lender, but generally, taxes, appraisals, credit reports and title insurance should be comparable for all borrowers. Common closing costs and fees that you may expect are:
Loan Origination Fee: A percentage of the mortgage (generally 1%), charged to set up and evaluate the loan application. This fee is a revenue item for the lender and/or broker. Also known as “points”. A very common charge up until the late 1980’s, however, consumer advocates advised borrowers to shop for loans without “points”. This fee is currently rarely charged, though some lenders still try to charge it for government loans. Loan origination fees are common for non-qualified mortgages that do not conform to the underwriting guidelines of the secondary market.
Credit Report Fee: Generally obtained from all three major credit reporting agencies (Equifax, Experian and TransUnion) in the form of a “merged” credit report.
Appraisal Fee: Used to obtain an independent appraisal of the subject property and determine its value. The appraised value helps determine the amount the lender will loan on that property.
Survey Fee: Verifies the legal position of the home on the subject property and ensures that there are no encroachments or setback violations on the subject property.
Title Search Fee: This fee is typically paid by the seller, in Florida, in connection with a purchase transaction. The borrower pays this fee when refinancing a property they currently own or building on a residential lot they already own.
Lender’s Title Insurance Policy: Required by the lender for protection again hidden title defects in connection with the subject property. A lender’s title insurance policy only protects the lender and is typically paid by the buyer at closing if they are obtaining mortgage financing. The lender will require the amount of coverage to match the loan amount and the premium charged is based on the loan amount. The seller typically pays for the owner’s title insurance policy in most counties in Florida. The amount of owner’s title insurance coverage will match the purchase price and the premium charged is based on the purchase price. Traditionally in Florida one settlement agent writes both the lender’s and the owner’s title insurance policies. As a result, the buyer receives a large credit, called a simultaneous issue credit, which dramatically reduces the cost of the lender’s title insurance policy.
Title Insurance Endorsements: Part of the lender’s title insurance policy. Borrowers should expect to always see a Florida Form 9 Endorsement fee and an Alta 8.1 Environmental Endorsement fee being required. Some of the other most common endorsement fees are for condominium units, homes located in planned unit developments (PUD’s) and/or variable rate mortgage loans. These fees are paid to the title insurance provider and not to the lender.
Discount Points: An optional fee paid upfront to reduce the interest rate paid on the loan.
Recording of the Deed: A fee paid to the county where the subject property is located to record the transfer of ownership into the buyer’s name(s).
Recording fees for the mortgage: Paid to the county in which the subject property is located.
Intangible tax on the mortgage loan amount: $2.00 per $1,000 of loan amount. Paid to the county where the subject property is located. Example: a $100,000 loan amount would result in $200.00 of Intangible Tax.
Documentary Stamps on the mortgage loan amount: $3.50 per $1,000 of loan amount. Paid to the state of Florida. Example: a $100,000 loan amount would result in $350.00 of Documentary Stamps on the Mortgage.
Prepaid per diem interest: Interest from the closing date to the end of the month.
Property Taxes: Dividing the current year’s property taxes between the buyer and seller. The buyer is responsible from the date of closing until the end of that year. The seller is responsible from the first day of the year until the date of closing.
Flood Certification Fee: A third party service used by lenders to determine if the subject property is currently located in a federally designated flood hazard zone. Additionally monitors, during the life of the loan, if federal flood maps change and the subject property becomes located in a federally designated flood hazard zone. If a subject property is located in a federally designated flood hazard zone, satisfactory flood insurance coverage will be required by the lender prior to closing.
Tax Certification fee: A third party service used by lenders to ensure that property taxes are paid every year, during the life of the loan, on the subject property.
Underwriting fee: Charged for the service of underwriting the borrower’s residential mortgage loan request. Typically paid to the lender, though it can be paid to a third party. A revenue item for most lenders, known as a “junk” fee, that borrowers should closely review when comparing estimates.
Processing fee: Charged for the service of processing the borrower’s residential mortgage loan request. Typically paid to the lender, though it can be paid to a third party. A revenue item for most lenders, known as a “junk fee” that borrowers should closely review when comparing estimates. Even if this fee is paid to a third party, it is still coming out of the borrower’s pocket.
Lender’s Administration fee/Lender fee: Charged for the service of administrating the processing, underwriting and closing of the borrower’s loan request. Paid to the lender. Definitely a revenue item for the lender, known as a “junk” fee, that borrowers should closely review when comparing estimates.
Document Preparation fee: Charged for the service of preparing the closing documents for the borrower’s closing. Typically paid to the lender, though it can be paid to a third party. A revenue item for most lenders, known as a “junk” fee, that borrowers should closely review when comparing estimates. Even if paid to a third party, it is still coming out of the borrower’s pocket.
Settlement fee: Charged by the settlement agent, either a title agency or attorney, to close the transaction to purchase, refinance or build the subject property. Typically on a purchase transaction in Florida, both the borrower and seller pay a portion of the settlement fee at closing. If there is mortgage financing involved, the borrower typically will pay a larger portion of the settlement fee due to the amount of extra time the settlement agent must spend on a financed transaction. This fee is not paid to the lender. Though some lenders and mortgage brokers also own title insurance companies.
Escrow Account Payments: Typically required by lenders when borrowers have less than a 20% down payment on Conventional mortgage loans. Required on FHA, VA and USDA mortgage loans. Sets aside funds for the upcoming payments of property taxes, the hazard/windstorm insurance annual premium, the flood insurance annual premium if the subject property is located in a federally designated flood hazard zone, the monthly private mortgage insurance premium on conventional loans with less than 20% down and the monthly mortgage insurance premium for FHA loans.
Hazard/Windstorm insurance policy: Also known as a homeowner’s insurance policy. Insures the subject property and contents of the home against perils such as fire or windstorm damage. The first year’s annual premium is required to be paid in full prior to closing or at the time of closing.
Flood insurance policy: Covers damage from “rising water”. Required if the subject property is located in a federally designated flood hazard zone. The first year’s annual premium is required to be paid in full prior to closing.