MORTGAGE LOAN
Closing Costs

Mortgage loan closing costs are the fees and expenses a borrower pays to finalize a home loan transaction. These costs encompass a wide range of charges, including loan origination fees, appraisal fees, title insurance, and recording fees. Additionally, they may cover prepaid expenses such as property taxes and homeowner’s insurance. Closing costs are necessary to cover the work of lenders, attorneys, appraisers, and other parties involved in the home-buying process. Typically, these costs range from 2% to 3% of the loan amount, depending on factors like the location of the property, the loan type, and the terms negotiated between the buyer and seller.

Closing costs are usually shared between the buyer and the seller, though the exact distribution depends on the purchase agreement and local market practices. Buyers are responsible for fees related to the loan, such as underwriting and application costs, while sellers may cover expenses like real estate agent commissions and transfer taxes. To help borrowers plan, lenders provide a detailed Loan Estimate at the beginning of the application process and a Closing Disclosure shortly before finalizing the loan, outlining all costs. Understanding and budgeting for these fees is essential to avoid surprises and ensure a smooth closing experience.

These closing costs are typically paid at the closing table, along with the down payment and other funds required for the transaction. It’s essential to review the estimated closing costs with your lender and real estate agent to ensure you’re prepared for the final costs associated with your mortgage loan.

Title Insurance
Title insurance protects the lender and buyer from any title defects, liens, or encumbrances on the property that may not be discovered during the title search. The cost of title insurance varies depending on the location, but typically ranges from $700 to $3,000. Title insurance companies may also offer additional services, such as a title search and escrow services, which may increase the cost.

Title Search
A title search involves researching public records to verify the property’s title history and ensure that there are no outstanding claims or liens on the property. The cost of a title search ranges from $100 to $300, depending on the complexity of the search and the location.

Closing Agent
The closing agent will either be an attorney or an escrow company, depending on the state.  The closing agent acts a neutral third party that helps facilitate the closing process.  Closing agent fees can rang from $500 to several thousand dollars depending upon the size of the loan amount. 

Appraisal Fee
An appraisal is an estimate of the property’s value, conducted by a licensed appraiser. The appraisal fee typically ranges from $300 to $1,000, depending on the location and complexity of the appraisal.

Home Inspection Fee
A home inspection is a thorough examination of the property’s condition by a licensed inspector. The home inspection fee ranges from $300 to $1,000, depending on the inspector’s experience and the size and complexity of the property.

Loan Origination Fee
This fee covers the lender’s costs for processing the loan application, including underwriting, document preparation, and administrative tasks. The loan origination fee typically ranges from 0.5% to 1% of the loan amount.

Underwriting Fee
The underwriting fee covers the costs associated with the lender’s review and approval of the loan application. This fee typically ranges from $300 to $1,000.

Prepaid Interest
Prepaid interest is the interest accrued on the loan from the closing date to the end of the month. This amount is typically calculated by multiplying the daily interest rate by the number of days remaining in the month and adding it to the loan amount.

Property Taxes
Property taxes are taxes imposed by the state or local government on the property. The closing costs typically include a prorated portion of the property taxes for the year, based on the closing date and the amount of taxes owed.

Homeowner’s Insurance
Homeowner’s insurance is a requirement for all mortgage loans. The cost of the first year’s premium is typically included in the closing costs.

Mortgage Insurance
Mortgage insurance (MI) is required for borrowers who put down less than 20% for a conventional loan or who choose not to purchase private mortgage insurance. The cost of MI varies depending on the loan amount, loan term, and borrower’s credit score.

Recording Fees
Recording fees cover the cost of filing the deed and mortgage with the county recorder’s office. These fees typically range from $50 to $250. 

Transfer Taxes
Transfer taxes are taxes imposed by the state or local government on the transfer of property. These taxes vary depending on the location and the value of the property.

Credit Report
The lender will pull a tri-merge credit report to identify any and all items relevant to a borrower’s credit history. Credit report fees typically cost between $50- $100.

Flood Certification
A flood certification is required to identify whether or not the subject property is located in a flood zone. A flood cert typically costs $15-$30.

Pest Inspection
A pest inspection aka termite report mey be required depending on the loan type. A pest inspection fee typically costs $50 to $250).

It’s essential to review the estimated closing costs with your lender and real estate agent to ensure you’re prepared for the final costs associated with your mortgage loan. Closing costs can vary depending on the location, loan type, and property value, so it’s crucial to discuss these costs with your lender and real estate agent early in the mortgage process.