Q: What are my closing costs?
A: Closing Costs are fees paid to the many people who work on your loan in all its varied aspects, from your Processor and Underwriter, to third parties such as the person who completes your home’s Appraisal.
Closing Costs are typically paid by the Buyer. Oftentimes, however, costs are divided between the Buyer, Seller, and sometimes the Lender in the form of a Lender Credit.
Your Real Estate Agent can help you if you wish to negotiate closing costs when making an offer or counteroffer to the seller. And I can explain what is involved in obtaining a lender credit that goes towards closing costs.
Q: What are prepaid items?
A: Prepaids are not a fee, as such, but are costs associated with your home that need to be paid in advance when getting a loan. These include Property Taxes, Homeowner’s Insurance, and Mortgage Interest that will accrue between the closing date and month-end.
Property Taxes and Homeowner’s Insurance are collected to put into your Escrow Account so that you have enough reserves to pay these bills then they are due.
Mortgage Interest: Whereas rent is usually paid a month in advance, your monthly mortgage payment is paid in ‘arrears’. This means that the mortgage payment you make on June 1st, for example, actually pays for the month of May. Borrower’s typically pre-pay interest when they take out a loan. For example: your loan closes on April 15th, your first mortgage payment will be due on June 1st. This may seem as if May is a free or skipped payment but, sadly, it is not. That’s because the June payment will pay the interest for May, and the amount due for the period between April 15th and 31st will be paid at closing.
Q: What influences the mortgage rates?
A: Navigating mortgage rates can be confusing and frustrating, and a variety of factors influence your rate, including personal circumstances such as your:
- Credit score
- Loan size
- Loan term
- Down payment / amount of equity in your home
- Paying points / closing costs
- Interest rate lock-in period
Q: What is my cash to close?
A: Cash to close is, basically, a combination of any Closing Costs covered by the Buyer; all applicable Prepaid monies; and your Down Payment amount, minus your Earnest Money Deposit. Cash to close is paid by wire fund or a cashier’s check made out to the Escrow Company. I will inform you of the exact amount needed prior to signing your final loan papers at the escrow office.
For Your Information
Your initial loan disclosures include a ‘Loan Estimate’ that details the closing costs on your loan. This is an estimate. Before closing, your mortgage’s Settlement Statement will enumerate the final costs on your loan. Typically, however, expect to encounter the following fees and costs:
- Appraisal Fee
- Credit Report fee
- Loan Origination charge (which includes Processing and Underwriting fees)
- Title Services & Lender’s Title Insurance fees
- Owner’s Title Insurance
- Recording charges
- Wire transfer fee
- Prepaid Mortgage Interest
- Property Taxes
- Prorated Taxes
- Homeowners Insurance reserves
- County Property Tax reserves
Additional fees that might be specific to your loan include: Subordination fee, Condo Questionnaire fee, Mobile Notary fee, and Discount Points. I will inform you of any and all fees throughout the loan process.