What You Should Know About Home Buying Closing Costs

Closing costs on a home can be extensive and include all expenses incurred by the lender in preparation of the loan. Often the fees are split between the buyer and the seller, especially if the seller wants to give the buyer a better opportunity to buy the house quickly. The fees are the charges the mortgage company requests from the buyer to cover their costs and all fees are listed as home buying closing costs.

The origination fee is a confusing fee, but simply stated it is the costs the lender is charging the buyer for the preparation of the loan's paperwork and the administration fee of 1% of the loan or less. The loan discount is points or fees assessed to get a reduction in the loan's interest rate. The amount paid for points varies from loan to loan and financial institution to financial institution. The appraisal fee is an easy fee to understand. The lender hires an accredited company to give them an appraisal of the property before they make the loan. That fee ranges from $300-$500 for the appraisal.

Other home buying closing costs include the credit report fee which is from $40-$55 and covers obtaining a credit report on the buyer before a loan is offered. This tells the lender if a loan should be made, how much to offer and at what rate. The lender's inspection fee is for an actual inspection of the structural integrity of the home and its inner workings. A mortgage insurance application fee is for the process of applying for the insurance. An assumption fee might also exist if the buyer is taking over the loan of the seller. This process incurs a fee.

Naturally, someone must get paid for their efforts. That someone is usually the mortgage broker, which is yet another aspect of home buying closing costs. The mortgage broker fee is included in the closing costs. The loan processing fees are more costs associated with putting the loan together. The underwriting fee is the charge by the investor for all paperwork submitted to carry the loan. A wire fee is the charge passed on to the buyer for wiring the money to the account. Flood certification is the certification required when the property is not in a flood zone; otherwise flood insurance is required.

These are the closing costs associated with an FHA backed mortgage loan. Conventional loans may vary a little, because FHA is more stringent with its loans. To estimate your total costs including the closing costs, request a good faith estimate. You can also request a HUD-1 Statement at least 24 hours before the closing is scheduled. This statement will allow you to compare your good faith estimate with your HUD-1 to see if there are any discrepancies. Your original estimate should be very close to the final costs assessed. Your closing costs should be somewhere between 1-3% of your home's final value.

By: Jeremy C. Winters

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