Additional Real Estate Fees

SURVEY FEE

The title insurance company or lender may require a survey of the property. This is to verify official boundaries of the property and that your lot has not been encroached upon by any structures. Depending on the size of the property and what state you live in, this cost ranges from $225 to $350.

ESCROW ACCOUNT

Most lenders require you to pay for some items that will due after closing. These prepaid items usually include insurance premiums for: Homeowners Insurance — also called Hazard, or Fire Insurance.

PRIVATE MORTGAGE INSURANCE

Lenders typically require a down payment of at least 20 percent of the purchase price. Private mortgage insurance makes it possible for a home buyer to obtain a mortgage with a down payment as low as 5% and for low-to moderate income homebuyers as low as 3%. Private mortgage insurance may be also required when buying a second home or refinancing an existing mortgage with cash out. Mortgage insurance protects the mortgage lender against financial loss if a borrower defaults. Low down payment mortgages are becoming more and more popular. Mortgage insurance allows borrowers to purchase a more expensive home than they might otherwise be able to afford. With lower down payment you retain more for home furnishings, or buying a car or other investments.

Typically, a portion of the mortgage insurance premium (depending on the premium plan chosen) is paid up front at closing, and the rest is paid as part of the monthly mortgage payment. Under an annual plan, a borrower pays the first-year premium at closing. Monthly plan allows homebuyers to pay 1 or 2 month’s mortgage insurance premium at closing. With single premium plan a borrower need to pay a one-time single premium. Some mortgage insurance plans allow adding the amount of the mortgage insurance premium to the loan amount. In that case borrowers make no mortgage insurance payment at closing and the first insurance payment is made with the first mortgage principal and interest payment.

The mortgage insurance premium is based on loan to value ratio, type of loan, and amount of coverage required by the lender. The good faith estimate of closing costs provides the estimated premium and monthly cost for the private mortgage insurance coverage.

It may be possible to cancel private mortgage insurance at some point, such as when your loan balance is reduced to a certain amount – below 75% to 80% of the property value. The law in certain states requires that mortgage insurance be cancelled under some circumstances. But because of the wide variation in lender, investor and state requirements, it is necessary to find out the specific requirements for cancellation before you commit to paying for mortgage insurance.

Mortgage insurance should not be confused with mortgage life insurance, which is designed to pay off a mortgage in the event of the borrower’s death.

Recording and Transfer Charges

A small fee (to $50 to $150) to cover the cost of the paperwork required to record your home purchase.

Documentary stamp tax on the mortgage varies from state to state and about 35 cents per $100 borrowed.

Interim Interest

Accrued interest from closing date until the end of the month

Lender’s and Buyer’s Attorney

This fee (to $500 to $1500) is to pay for preparing and reviewing all of the documents needed to close your loan.

Usually an application fee, credit report fee and the appraisal fee will have to be paid when you submit the mortgage application.

You Can Divide All Closing Costs into Two Basic Groups

  • Amounts paid to state and local governments. These include city, county and state transfer taxes, recordation fees, and prepaid property taxes.
  • Costs of getting a mortgage. These include title insurance, survey, appraisals, credit checks, loan origination and documentation fees, commitment and processing fees, hazard and mortgage insurance and interest prepayments.

Payments to local governments should be the same at every lender. So should fees for appraisals, credit reports and title insurance. Total costs you can expect to pay are from 3% to 6% of the amount of your mortgage loan.