Closing Costs & Pre-Paid
Closing Costs and Pre-Paids are typically paid by the Buyer. However you can actually negotiate who pays for them when making an offer. Your Real Estate agent can help you during the offer and/or counter-offer process, as long as they are informed of what you need. Always be sure to keep the Realtor and Loan Officer in contact to help you negotiate the best deal.
Closing Costs are fees that are paid to the people who are working on the many aspects of your loan. In the end, most likely close to two dozen individuals will have worked on your file and helped in getting you your loan.
Pre-Paids are costs associated with taxes, insurance and pre-paid interest. Most of this money will be placed into an Escrow Account where it will be held until your property taxes or insurance premiums come due. Remember, if you sell or refinance your home, the money in the Escrow Account will be sent back to you, minus only the exact cost for insurance and taxes up to that date.
Here is partial list of fees you will mostly encounter when getting a loan:
- Appraisal fees vary depending on your lender approval, loan program and/or property type. The appraiser is the eyes and ears of the lender.
- Credit report fees are a set fee based on the exact cost associated with getting the required credit report as outlined by the lender. Additional fees may be charged if credit supplements are required to further explain items found on the report.
- Document preparation fees cover the cost of assembling your closing package and ensuring their accuracy.
- Escrow fees are charged for sale or refinance transaction for handling the closing and signing process as well as making sure all required documents are recorded with the county. Your escrow officer will also make sure your contract is executed as outlined in your Purchase Agreement
- Loan origination fees (points) are typically paid when a lower interest rate is obtained. You can eliminate points by taking a slightly higher rate.
- Prepaid interest covers the interest through month’s end until your first payment is due.
- Property taxes are paid at closing when you elect or are required to have an impound account. The amount payable will depend on what month your first payment is due and if the seller has pre-paid taxes covering months after which you will own the house.
- Recording fees are paid to the County to record your deed and mortgage documents.
- Title insurance & Homeowner premiums provide loss coverage required by the lender.
- Underwriting & Process fees can vary from lender to lender. These fees represent the payment to the many people that are involved in helping close your loan.
- Wire Transfer, Flood Certification & Tax Related Service fee are all miscellaneous fees charged by lenders in order to cover administrative costs and ensure proper insurance protection is provided by your chosen Home Owners Insurance Company.
