| Most people understand how interest rates affect | | | | Title Search and Title Insurance |
| the cost of a home mortgage, but closing costs | | | | Before approving your mortgage, lenders also |
| are a bit more of a mystery. Many first time | | | | require a title search and title insurance. A title |
| homebuyers know that they’ll have to bring a | | | | search firm will research the history of the house |
| check to cover the “closing costs,” when | | | | you want to buy to make sure that the title to it |
| they sign the papers to close on their mortgage. | | | | is “clear” — that there are no |
| But not everyone understands exactly what’s | | | | outstanding liens or encumbrances that might |
| included in those costs. Even those who have | | | | impact the ownership of your home. Even a |
| gone through the process don’t always | | | | thorough title search, though, may miss some |
| understand what the closing costs are and why | | | | bizarre happenstance that could affect your home |
| they are paying them. Here are some of the | | | | ownership. In that case, title insurance will pay any |
| closing costs and fees that you may have to | | | | expenses related to fighting a claim against your |
| cover when you buy a new house or refinance | | | | title, or pay off your mortgage so that you are |
| your mortgage. | | | | free to buy another house. |
| Loan Origination Fees | | | | Credit Report Fee |
| Loan origination fees pay the lender for preparing | | | | The bank or lender will charge you the cost of |
| and submitting the proposed loan, as well as for | | | | getting your credit report, generally $40 to $50. |
| evaluating it and approving it. While some lenders | | | | Recording and Transfer Fees |
| offer a flat loan origination fee, most banks and | | | | You may be charged a small fee for the cost of |
| lenders express the loan origination fee as a | | | | recording the sale with the county clerk’s |
| percentage of the total loan amount. | | | | office and other legal fees related to the transfer. |
| Points | | | | In addition, you may have to pay a document |
| Points are another fee that can be confusing to | | | | stamp tax of about 35 cents per $100 of loan |
| first-time home buyers. Simply put, points are a | | | | amount. |
| way to pay some of the interest on your loan up | | | | Prepaid Property Taxes and Escrow |
| front, and thereby lower the interest rate on | | | | The lender may require that you establish an |
| your loan. Lenders set their own price for points, | | | | escrow account that will hold premiums for things |
| but in general, each point that you pay will lower | | | | like homeowner’s insurance, private mortgage |
| your interest about one-eighth of a percentage | | | | insurance and property taxes. These insurance |
| point and cost about $1,000 for every $100,000 | | | | policies and prepaid property taxes protect the |
| of your loan. Points can be a good idea if you plan | | | | lender from losing the house if you fail to insure it |
| to live in the home you’re buying for a long | | | | or pay taxes properly. |
| time. If you plan to move within a few years, you | | | | In addition, you will have to pay an attorney fee |
| won’t recover the cost of the points and | | | | — generally $300-$500 — for your attorney |
| you’re better off paying the interest on the | | | | to review the loan documents and represent you, |
| loan. | | | | and interim interest, the amount of interest due |
| Appraisal Fee | | | | on the loan from the closing date to the end of |
| Before a lender will approve a mortgage, they | | | | the month. |
| require an independent appraiser to make a | | | | All of these closing costs should be listed in detail |
| valuation of that home. The cost of the appraisal | | | | in your closing papers so that you know exactly |
| will be tacked onto your closing costs — usually | | | | what you are paying in fees and charges. They |
| between $100 and $400. You may also have to | | | | should also be detailed in the official Good Faith |
| pay a survey fee to establish the boundaries of | | | | Estimate that you receive before the loan closing. |
| the property on which the house sits. | | | | Some lenders will be willing to negotiate some of |
| Application Fee | | | | these costs and fees, or even waive them |
| Most lenders charge an application fee when you | | | | entirely. |
| apply for a mortgage, though a few notably do | | | | For financial planning purposes, it’s important |
| not. That application fee generally must be paid at | | | | to understand all of the costs and fees of closing |
| the time you submit your application. Many lenders | | | | a mortgage. Buying a home is expensive, so |
| will apply your application fee to your closing | | | | every step you can take to plan for the future |
| costs. If you pay a $100 application fee, your | | | | matters. |
| closing costs may be reduced by $100. | | | | |