What do closing costs include?

Soon after you apply for a loan, RMS will provide you with a “Loan Estimate” of your closing costs. Please keep in mind that the figures quoted on the Loan Estimate will not be exact down to the dollar. Your final “Closing Disclosure” will specify in detail the exact amount that you will need to bring to closing and will be issued 3 business days prior to settlement for your perusal. Loan-Related Costs
  • Origination Costs- A mortgage broker or lender fee charged for originating the loan.
  • Discount Points- Paid up front to lower your interest rate based on your loan amount.
  • Appraisal Fee- Cost for an independent valuation of the market value of your home.
  • Closing fee or notary fee- The fee charged by the closing agent to witness and review the loan documents.
  • Taxes-The annual cost of your property taxes ( Can be a significant amount based on the county and state in which you live. )
  • Up-Front Mortgage Insurance (UFMIP) (FHA Loans) (VA FUNDING FEE)-The up- front cost that the FHA or VA charges for the use of their government program in the event your loan goes into foreclosure. Lenders can file a claim against this insurance to help offset their losses.
  • Survey Fee- Paid for a survey of your property boundaries.
  • Courier Fee- Cost of taking the mortgage and deed to the county clerk of the court for recording.
  • Commitment Fee-Charged by some lenders for obtaining an official approval to agree to make a loan to you based on agreed to terms.
  • Home Inspection Fee-This cost is paid directly to the home inspector you hire to complete a thorough inspection of the home you are about to purchase. This process is often coordinated by your real estate agent representing you.
  • Recording/Government Filing Fee- The cost by the county and state to record the new mortgage and deed to the property.
  • Transfer Taxes and Recording Fees-( varies by state and county) Usually calculated based on the mortgage amount and purchase price of the property. One of your most expensive costs associated with the purchase of a new home. Often shared between buyer and seller 50/50.
Insurance Costs
  • Property Insurance Costs (varies by state/county)- Required to insure the home and the lender’s interest. Protect the home from fire and other risks associated with owning a home.
  • Title Insurance-Protects both the buyer and lender insuring that upon the transfer of ownership there are no other intervening liens or judgments attached to the title of the property. Protects all parties against possible fraudulent acts that could have been committed within the purchasing process.
  • Private Mortgage Insurance (PMI)- Works the same way as FHA or VA mortgage insurance would work. It is required when a borrower does not put down a 20% down payment on a conventional loan. It is insurance in the public sector by private companies to insure that 20% piece that a lender needs as cushion in the event of foreclosure to offset their losses. This amount that you will pay for this premium can be a lump sum, (upfront monthly or paid by the lender for you through a higher interest rate (Called LPMI or lender paid mortgage insurance) This premium amount is based on your credit score . The lower your middle credit score, the higher the premium. It becomes part of your mortgage payment included in your escrow amount.
  • Flood or Earthquake Insurance (dependent on location)- Flood insurance is required by the government through FEMA ( The Federal Emergency Management Agency) and is dictated based on where your property is located on the flood zoning maps. Your lender will obtain a Flood Certification prior to closing to advise you whether or not the property lies in a flood plain. Flood premiums can be quite expensive depending on how close your property is to water and the elevation of the dwelling itself. Most waterfront properties require flood insurance. Earthquake Insurance is common in California as one might imagine. Any properties located in states that are impacted by earthquakes require this separate policy as part of approving the loan. These insurance premiums are also escrowed within your mortgage payment each month.
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