Closing Costs Home
There are plenty of fees that
you will need to be aware of whether you're purchasing or selling a home in
Dallas. Depending on prior negotiations, the
buyer or the seller could be responsible for these costs, although typically
the most of it is paid by the buyer.
All closing costs are spelled
out in the lenderís Good Faith Estimate. If you want to make sure you are
paying the least amount possible in closing cost fees, you should get at
least three Good Faith Estimates from mortgage lenders. This is only an
estimate and the actual charges may differ. RESPA allows the borrower to
request to see the HUD-1 Settlement Statement that shows all actual charges
imposed on borrower in connection with the settlement one day before the
settlement. If you see a charge that doesnít make sense, or that no other
lender has, itís time to ask questions.
Hereís an example of what you
can expect to pay (some costs vary widely from state to state, so you should
determine exactly what you will have to pay):
Discount and Origination
Points - Points are equal to a percent of the loan
amount. 1.75 points is equal to 1.75% of the loan amount.
points represent additional money you can pay to the lender at
closing. If you pay more points it will lower the interest rate. Usually,
for each point you pay for a 30-year loan, your interest rate is reduced by
about 1/8th (or .125) of a percentage point. Paying points can be good if
you plan on living in the home for a long time.
Origination Points - (or Loan origination
fee) charged by the lender for evaluating, preparing, and
submitting a proposed mortgage loan. Origination fees are often expressed as
a percentage. A one percent loan origination fee is equal to 1% of the loan
amount. Some lenders add origination points into their quoted points while
other lenders add an origination point in addition to their quoted points.
Application Fee - covers the lenderís cost to process the
information on your loan. Usually, you must pay this charge at the time you
file the application. Some lenders may apply the cost of the application fee
to certain closing costs. Generally lenders do not refund this application
fee if you are not approved for the loan or if you decide not to take it.
Appraisal Fee - This fee ($150 to $400 depending on the price of
the home) pays for an independent appraisal of the home you want to
purchase. The lender requires this estimate of the market value of the house
for the loan. Factors to be considered in determining market value are:
present cash value; use; location; replacement value of improvements;
condition; income from property; net proceeds if the property is sold, etc.
The appraisal is a critical factor in determining how much of a mortgage the
bank or mortgage company will approve. After the appraisal is completed, the
borrower is normally entitled to a copy of the appraisal from the lender.
Credit report Fee -
Three major national credit bureaus (Equifax, TransUnion and
Experian) supply lenders with the information on your credit behavior.
Consumers typically pay $45 to $55 for this report.
Title search and title insurance
A title search is a detailed examination of the historical records
concerning a property. These records include deeds, court records, property
and name indexes, and many other documents. The purpose of the search is to
make sure the buyer is purchasing a house from the legal owner and there are
no liens, overdue special assessments, or other claims or outstanding
restrictive covenants filed in the record, which would adversely affect the
marketability or value of title.
A title search can show a
number of title defects among these are unpaid taxes, unsatisfied mortgages
and judgments against the seller. But there are some hidden defects that
even the most diligent title search may never reveal. For instance, the
previous owner could have incorrectly stated his marital status, resulting
in a possible claim by his legal spouse. Other problems include things like
fraud, forgery, defective deeds, mental incompetence, confusion due to
similar or identical names, and clerical errors in the records. These
defects can arise after you have purchased your home and jeopardize your
right to ownership.
A certificate of title --
issued by a title company that did the title search -- offers no protection
against any hidden defects in the title which an examination of the records
could not reveal. A title insurance protects
against any tax liens, unpaid mortgages, or judgments missed in the research
of the history of title on the property. If a claim is made against your
property, title insurance will, in accordance with the terms of your policy,
assure you of a legal defense and pay all court costs and related fees.
Also, if the claim proves valid, you will be reimbursed for your actual loss
up to the face amount of the policy.
Basically there are two
different types of policies - a lender's policy and an owner's policy. The
lender's policy protects the lender's interest in the property as security
for the outstanding balance under the buyer's mortgage. The owner's policy
safeguards the buyer's investment or equity in the property up to the face
amount of the policy. The cost of the policy is usually based on the loan
It is required to obtain a
lender's title insurance policy only. If you also desire the protection of
title insurance you should purchase a buyer's title policy. This is a one
time premium, and usually the cheapest rate might be offered by the company
that did the title search. It is also advisable to inquire about the
seller's title insurance policies on the property, for it may be possible
for you to obtain a policy at a lower reissue rate.
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 -- and Private
Mortgage Insurance) and Real Estate Taxes. The HUD regulations limit the
amount of money a lender may require the borrower to hold in an escrow
Flood Certification -
Some homes require flood certification fees, amounting up to $30. It
verifies that the property is not in a flood zone. If the property is
located within a defined zone the lender will require a flood insurance
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.
Information provided by Mortgage Information Service