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The purchase of a home comes with other expenses besides the down payment and monthly mortgage payments. There are costs associated with the application process as well as mortgage closing costs.
You'll receive a Loan Estimate from your lender after submitting your loan application. This will list the estimated fees and costs you can expect to pay. Here's what they typically include so you can plan ahead.
Before approving your loan, your lender may order a home appraisal to determine the property's market value. If the home appraisal cost isn't included in your loan application fee, you may be required to pay it separately.
Lenders charge this fee to look at your credit report from each of the 3 major credit agencies.
Before approving your loan, a lender will need to find out whether the home is in a flood hazard area. If it is in a flood hazard area, flood insurance will be required in addition to your homeowners insurance.
You may decide to pay points for a lower interest rate on your loan. Mortgage points are usually collected in cash at closing as part of the borrower's closing costs.
An origination fee covers the costs of processing your mortgage application. This fee may be collected upfront or as part of your closing costs.
In addition to lender required title insurance, property owners can obtain title insurance to protect against disputes that may arise regarding ownership of the property, including fraudulent claims against ownership, liens, and undisclosed heirs as well as certain boundary disputes.
As part of the mortgage lending process, you will give the lender a mortgage on the property. The mortgage is recorded in the public records and provides notice of the transaction to other interested parties. The fee varies by county and is based on the number of pages being recorded.
Title companies or attorneys charge a settlement fee to conduct the mortgage closing. The mortgage closing is when you'll sign the mortgage loan documents so the mortgage can be recorded and loan funds can be paid on your behalf.
Your lender may use a tax service agency to ensure that property tax payments are made on time and to prevent tax liens. The tax service fee covers this cost.
Lenders require title insurance on the property to protect against adverse claims to the lender's mortgage interest in the property. This fee is part of the borrower's closing costs and is collected at closing.
Some states charge a transfer tax for purchasing a property. Each state determines the tax amount and who pays for transfer of legal deeds, or a change of title, with the Land Title Office.