Valeria Mitchell

Realtor, Certified Probate RE Specialist

 Clarifying closing costs

Application Fee: Fee charged by the lender to offset fixed costs related to mortgage loan processing such as appraisal, credit report, and underwriting.

Closing Fee: The fee charged by the closing agent who prepares the closing documents and closes the loan on behalf of the lender.

Commitment Fee: This is often called an origination fee.

Discount Points: Each point is equal to one percent of the mortgage amount. The lender uses points to adjust the yield on the mortgage when it is sold to an investor. By paying more points, the borrower can obtain a lower mortgage interest rate.

Funding Fees: Normally applicable to VA loans only, equal to one percent of the loan amount. The fee is due at closing or may be added to the loan amount and financed.

Homeowner's Insurance: A one-year premium is due in advance at time of closing.

Mortgage Insurance: Insurance that is required by the lender when the down payment is less than 20 percent. In the case of loan default, this insurance reduces the lender's loss.

Pre-Payables: Adjustments to escrow accounts from the date of closing to the date of the first payment. Interest is paid through the end of the month of closing. Taxes are paid through the end of the month of closing plus the following month. Two months of PMI (Principal Mortgage and Interest) are collected. Two months of homeowner's insurance must be provided along with a receipt showing that the first year's premium is paid.

Processing Fees: Fees charged by the escrow processor, either working for the escrow company, title company, or real estate company for administrative services performed from the point of contract through closing.

Recording Fees: Fees charged by state or municipal entities for entering the closing documents into the public record.

Survey Fee: The title company checks the survey for encroachments from within or from outside the subject property.

Title Insurance: Provides protection for lenders and homeowners against financial loss resulting from legal defects in the title.

Underwriting Fee: Practices vary from lender to lender. Check the good faith estimate for the amount of the underwriting fee.

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