A Quick Look at Charges and Fees. Money for a
down payment is not the only cash involved in getting a home loan.
You need to also consider closing costs.
Closing costs are charges, fees and pre-paid items for processing
your loan and mortgage. Closing costs can even include an optional
expense you pay to reduce your interest rate.
Closing costs are collected by the lender but are paid to various
organizations from the lender to the government to the mortgage
broker, if you use a mortgage broker instead of a direct lender
like Full Spectrum Lending. These expenses vary from state to state
but often add up to between 3 and 6 percent of the amount of money
are closing costs?
Whether you are buying a home or refinancing,
there are 3 basic types of home loans. Each has different
reasons you'd choose them. Click any loan for more detailed
Fees Paid When
You Apply for a Loan
Typically called "third-party fees", these fees
are collected by your lender to pay for services provided
by outside parties, such as an appraiser.
Appraisal Fee - The amount charged by an appraiser
who determines the value of a home.
Credit Report Fee - The fee for receiving your credit
report from a credit reporting agency. Unlike most traditional
lenders, Full Spectrum Lending charges this fee at your closing.
Fees for Closing
These are fees typically paid on the day your home purchase
or refinance is final. If you are buying a home, some of these
fees may be negotiable with the seller he or she may
agree to share some closing costs. If so, make sure this agreement
appears in the purchase contract you sign.
If you want to keep
more cash on hand, your lender may suggest including your
closing costs in your total loan amount. This is what it means
when you hear "no cost" or "no out-of-pocket
expenses". Often available with home refinance loans,
this option has the advantage of eliminating your upfront
expenses. The disadvantage is that your loan amount increases
and you end up paying interest on the costs. We'd be glad
to help you decide whether this option is for you.
Real Estate Agent Commission - The amount you've negotiated
to pay a real estate agent or broker when you buy a house
-- usually, a percentage of a home's price.
Origination Fee - The fee charged by the lender for
processing your loan.
Loan Discount or "Points" - You can sometimes
receive a lower interest rate, by "paying points".
A point is equal to 1% of the amount of money you are borrowing.
Settlement or Closing Fee - The fee paid to the closing
agent to act as a disinterested third party who handles the
finalizing of your loan and the purchase of a home.
Title Insurance Costs - To issue title insurance, government
and other records must be searched to make sure no one else
has a legal claim to the home. A title insurance binder and
an insurance policy are also required. You are charged separate
fees or an all-in-one amount for these costs. The title insurance
policy you are required to purchase protects the lender. It
is a very good idea to pay a little bit extra and take out
a separate title insurance policy that protects you.
Attorney's Fees - If you live in an area where an attorney
works on title or other parts of a home purchase, there is
a fee for legal services.
Property Taxes - Any local property tax must be paid
annually. If you purchase a home in the middle of the year,
you may be asked to share some of the year's taxes with the
home seller. The closing agent prorates the amount you owe.
City, County and State Charges - The local governments
where you live may charge taxes and fees to record and stamp
documents such as deeds and loan paperwork.
Survey - The cost of surveying the property to determine
the size of the lot your home is on. Or, for example, whether
a public utility company has a right to have access to the
Pest Inspection - If an appraiser notices signs your home
may have termites or other pests, or if the laws in your area
require it, a pest inspection and report must be done. Fees
for these services are included in closing costs.
Flood Check Fee - Lenders must check Federal Flood
Maps to find out if your home requires flood insurance. This
fee covers the map search and issuing a certificate.
Required by Lenders
When you purchase or refinance a home, there will be some
necessary charges to cover things like the interest on your
loan until your first payment is due. These are called "pre-paids"
and are collected on the day your purchase or refinance is
Interest - If your loan is finalized before the last
day of the month, at closing you must pre-pay interest on
the loan for the time between the day the loan funds and the
first day of the next month.
Homeowners' Insurance Premium - One year of this insurance
coverage that protects the lender and you if the property
is damaged is paid at the loan closing.
Private Mortgage Insurance - Typically, if you make
a down payment of less than 20 %, lenders require Private
Mortgage Insurance (PMI) to protect themselves in the unfortunate
event that a borrower does not repay the loan. (Full Spectrum
Lending loans do not require PMI.)
Reserve or Escrow or Impound Account - This account
is set up and held in trust for you by the lender. It is used
to pay for property taxes, homeowners' insurance, flood insurance
and PMI. Usually, at loan closing enough money to pay for
at least 2 month's worth of these items is deposited in the
account. Your lender pays these bills for you when they are
due. Your monthly mortgage payment includes money that is
deposited into this account. Not all loans require a reserve