About Closing Costs
Because we work with several mortgage lenders who all try to obtain the best rates and loan programs for you some costs and funds needed at the loan closing can vary. Once set-up with a mortgage lender you receive a good faith estimate as the fees listed on it will be close to the final amount needed.
In real estate transactions real property is conveyed from a home seller to a homebuyer through a real estate contract followed by a deed to the property that is recorded in the county in which the property is located. The point in time at which the contract is actually executed and the title to the property is conveyed to the buyer is known as the closing. It is common for a variety of costs associated with the transaction and are above and beyond the price of the property to be incurred by either the homebuyer and the home seller. This summary is intended to help you understand those costs & fees.
Examples of typical closing costs might include:
Appraisal Fees – The Appraisal fee is usually paid by the homebuyer upfront or in some cases at closing or by the home seller. They are the actual fee charged by a third party a licensed real estate appraiser. The mortgage lenders will require that an appraisal be performed as a condition of the mortgage loan. The purpose of this appraisal is to verify that the sale price of the property is equal to or more than the fair market value of the property. The typical appraisal fees range between $400.00 and $750.00.
Attorney Fees – Are paid by either or both parties, for the preparation and recording of official documents. The principals and/or mortgage lender may each be represented by their own attorney. Typically required by institutional/commercial lenders to ensure documents are prepared correctly. The attorney fees are usually around $500.00 to $800.00.
Broker Commission - Are paid by the home seller to a Real Estate Broker to compensate the real estate broker(s) involved in the sale for their services in marketing the property, finding a buyer and assisting in the negotiations. Broker commissions are usually computed as a percentage of the sale price and are established in a listing agreement between the home seller and the listing broker. The listing broker may offer a homebuyer agent a portion of their commission as an incentive to find a homebuyer for the property. This payment is required if real estate broker was used on the transaction. This is often one of the most costly closing costs to a home seller and in some cases to a homebuyer.
Credit Report Fees – Is a fee is usually paid by the homebuyer upfront to cover the costs of the required credit report in the mortgage loan file. The typical credit report fees ranges from $15.00 to $100.00.
Commitment Fee – Is a fee is usually paid by the to the mortgage lender to have the banks closing department and attorney review the file to get ready for the loan closing. The typical commitment fee ranges from $300.00 to $800.00. Discount Points - Are paid by the home buyer to the mortgage lender. Points are a form of pre-paid interest, charged by the lender as an alternative to charging a higher rate of interest on the mortgage loan. One point equals one percent of the loan principal.
Flood Certification Fee - Is a fee charged at the loan closing to cover the costs for a flood certification to make sure the property is not located in a flood zone and flood insurance will be required to protect the property. The flood certification fee is usually $20.00.
Home Warranties – Are a fee for a service usually paid by either the homebuyer or the home seller. Home warranties are available on resale homes insuring major household systems against repair or replacement for the buyer's initial year of ownership. Sellers will sometimes offer these warranties as a marketing strategy, or buyers can elect to purchase them at closing.
Inspection Fees – Are usually paid by the homebuyer and are charged by licensed home inspector, pest inspector or other property inspectors. Some mortgage lenders require inspections such as a termite inspection to verify that the property is in good condition, which is necessary to assure that the property will retain the necessary collateral value to secure the mortgage loan.
Mortgage Application Fees – Are typically paid by the home buyer to the mortgage lender to cover the costs associated with the processing their mortgage loan application. In some cases the mortgage lender does not charge this fee, but when charged the usual application fee is $495.00.
Mortgage Tax - Is a tax or fee that paid by the homebuyer / borrower to record a mortgage in the state of New York. The mortgage lender is also responsible for paying for a percentage of the mortgage tax. This tax is a New York state tax and varies depending on the county where the property is situated.
Origination Fee - Are paid by the homebuyer to the mortgage lenders and they are usually one percent of the mortgage loan amount to cover the fee and costs of the loans origination.
Pre-paid Property Insurance – Mortgage lenders will always require that a property with a mortgage loan be insured at all times throughout the life of the mortgage. They will usually require that the first full year's property insurance premium be paid in advance by the homebuyer. If the buyer has not already paid the insurance company this would become a closing cost payable at closing. The homebuyer will be also required to place two months of the yearly premium in an escrow account so when due there will be funds there to make the payment.
Pro-rata property taxes – Are paid by the home seller and or the homebuyer or both depending on when the property taxes are due. Most jurisdictions assess property taxes which are usually payable at a specified date annually, semi-annually or quarterly. Since no properties close exactly on the date most transactions must have an adjustment to assure that both the home seller and the homebuyer pay their share of the property tax. Each pay a proportionate amount of the yearly taxes that each has ownership of the property. The homebuyer is also required to place a certain amount of taxes in the escrow account to make sure when the bill is out there are funds to pay. Pro-rata Homeowner Association Dues - Are paid by the home seller or the homebuyer. If the property is covered by a Homeowner Association (HOA) the HOA will normally be funded by dues assessed against each property owner.
Pro-Rata Interest – Is paid by the home buyer and is calculated and payable to the mortgage lender as an adjustment that is made to calculate the interest on the loan for the number of extra days until the first payment is due. This happens if the closing does not actually fall on a specific date since the interest on the mortgage is paid in arrears.
Recording Fees – Are paid by both the homebuyer and home seller as they are the fees charged by a governmental entity for making public an official record of the change of ownership of the property. They are fees required by the county clerk’s offices for recording the deed, satisfaction of mortgages and new mortgage’s or deeds of trust. The recording fees are usually around $100.00.
Survey Fee – Is required on some property’s to show on a survey of the lot of land and all structures on it and to confirm lot size and dimensions and check for encroachments. They are required by some mortgage lenders or an old survey from the home seller may be used. They usually cost between $800.00 to $1,000.00.
Tax Service Fee - Is a fee that is charged to the homebuyer payable to a third party to set-up the tax payments to the taxing authority. The tax service fee usually cost between $75.00 to $85.00.
Title Insurance Fee – Is a fee charged by a title insurance company to insure the title to the property free of defects to the mortgage lender and the homebuyer. They are usually charge a fee that range from $800.00 to $1,500.00.
Transfer Taxes - Are fees that are paid by both the home sellers and homebuyers and are charged by a governmental entity as a tax upon the recording of the transaction. They are usually a percentage of the value of the transfer amount.
Wire Transfer Fee – Is a fee charged by mortgage lenders for the costs of wiring the funds to the loan closing. They are usually charged by mortgage lenders and range between $25.00 to $50.00.