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We have tried to put together a complete
list of closing costs. Some of these costs may not apply to you.
APPRAISAL FEE
This is charged to pay an appraiser to research and assess the market
value of the property on which a mortgage is being placed. Instead
of being charged for separately, this fee may be charged for as part
of a mortgage application fee.
COURIER/MESSENGER FEES
This fee pays for overnight courier services and messenger services used
to transport documents to and from the lender and to and from the local
county courthouse where the deed and mortgage are recorded.
CREDIT REPORT FEE
This is charged to pay a credit service bureau to provide the lender
with a report detailing a borrower's credit history. Instead of being
charged for separately, this fee may also be part of a mortgage application
fee.
DOCUMENT PREPARATION FEE
This is sometimes charged by lenders to offset costs associated with
preparing paperwork for a loan closing.
FLOOD CERTIFICATION FEE
This is charged to offset fees paid by lenders to flood service companies
to determine initially and on an ongoing basis, whether properties on
which the lender has a mortgage are part of or become part of a "flood
hazard area" as determined by appropriate Federal agencies. If so, the
property owner is required to obtain flood insurance.
HAZARD INSURANCE ESCROW
Similar to real estate tax escrows, many lenders require that they collect
1/12 of the property's annual hazard insurance premium with each mortgage
payment to fund an escrow account from which the lender will pay the
premium when it becomes due. (Hazard insurance is property insurance
that you are required to purchase to cover any damage that may occur
to the property itself or to someone while in or on the property.) Even
though in a purchase transaction you are required to pay the first year's
premium prior to or at the closing and in a refinance transaction the
insurance may be paid up for many months following the closing, the escrow
insures that the lender will have enough money in your escrow account
when the premium next becomes due. The lender is also entitled to collect
an additional amount to provide a one to two month "buffer" in your escrow
account. At closing, hazard insurance escrow requirements generally range
from two months in purchase transactions to anywhere from one to eleven
months in refinance transactions.
INSPECTION FEE
This may be charged if a lender has to have someone inspect a property
after an appraisal has been done. For example, if work being done to
a property is not completed at the time the appraiser viewed the property.
MORTGAGE INSURANCE
In the event that the loan you are requesting from the lender exceeds
80% of the market value of the property being mortgaged, the lender
will generally require you to pay for obtaining a mortgage insurance
policy. This protects the lender if you default on your loan and the
equity in the property is not sufficient to cover any losses the lender
incurs as a result of that default. Depending on the amount by which
the "loan to value ratio" exceeds 80%, the first year's premium generally
ranges from .35% of the loan amount to 1% of the loan amount.
MORTGAGE INSURANCE ESCROW
In the event you are required to obtain mortgage insurance, as described
above, the lender will generally require that they collect 1/12 of your
mortgage insurance premium with each mortgage payment to be able to pay
the premium when it next becomes due.
POINTS
This cost is the direct cost by the Lender to be able to buydown your
interest rate. One point equals 1% of the loan amount. In a typical
transaction, a borrower pays from 0 -2 points to the lender. The number
of points is directly related to the interest rate charged by the lender.
The more points a borrower pays, the lower the interest rate and vice
versa. One has to think about if the savings in the payment from the
buydown offsets the cost of the buydown in the timeframe you plan to
be in your new home. Rule of thumb calculation: .125% on the rate =
.50% - .75% of the loan amount in cost (approx.)
PREPAID INTEREST
At the time you obtain a mortgage loan your first payment is generally
due on the first day of the second month following your loan closing.
That is because mortgages are generally paid "in arrears". (In other
words, the payment being made on the first day of the month is for
the interest due for the month preceding the payment.) For example,
if you close on the 15th day of January, your first payment will be
due on March 1 and that payment will pay for the interest accrued during
the month of February. Therefore, the lender at closing, will charge
you for the interest due for the period from the date of the closing
to the beginning of the following month. (In our example, that period
would be from January 15 to February 1.) As a result, depending on
the day of the month in which you close, prepaid interest can be from
0 days to 30 days. Prepaid interest (on a per diem basis) is calculated
by multiplying the loan amount by the annual interest rate and dividing
that number by 360 or 365 (depending on the lender).
REAL ESTATE TAX ESCROW
Many lenders will require that they collect 1/12 of the property's real
estate taxes with each monthly mortgage payment that you make to fund
a tax escrow account from which the lender will make the real estate
tax payments as they become due. Since real estate tax payments are due
at different times during the year, the lender may need to collect all
or a portion of the next real estate tax payment at the time of your
loan closing (depending on the month in which the closing occurs) to
insure that they have enough money in your escrow account when the next
tax payment becomes due. The lender is also entitled to collect an additional
amount to provide a one to two month "buffer" in your escrow account.
SURVEY FEES
This fee is charged to pay a surveyor/engineer to survey the property
being mortgaged and prepare a "plot plan" which includes a certification
that the structures and other improvements on the property do not violate
any property laws and do not encroach upon anyone else's property.
TITLE SEARCH FEE / TITLE EXAMINATION FEE
These fees (generally expressed as either a title search fee or a title
examination fee) are charged to pay for the cost of researching and/or
examining the records of the county in which the property lies to determine
that the title to the property is free and clear of all defects, liens
and encumbrances that could affect the use and/or value of the property.
TITLE INSURANCE FEE
This fee is charged to pay for a title insurance policy (known as a "lenders
title insurance policy" which protects the lender in the event there
is a defect in the title to the property. Most lenders require that such
a policy be purchased by the borrower at closing. The borrower has the
option of purchasing an "owner's title insurance policy" to protect the
borrower's interest in the property in the event there is a defect in
the title, for an additional premium. However, an owner's policy is not
required by the lender. In most transactions in Oregon , the Seller pays
the owners title policy, unless the earnest money agreement dictates
differently.
UNDERWRITING FEE / PROCESSING FEE
These are types of fees charged by some lenders to offset the costs lenders
incur in reviewing , underwriting and processing a borrower's application
for a mortgage loan.
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