Explanation of Standard Closing Costs & Pre-Paid Items

Origination Fee – lean fee that is charged at usually 1% of the loan amount.  This fee tends to be lower than the interest rate.  It can be negotiated, but the lower the origination fee, the higher the rate will be in most cases.

Appraisal Fee – when the appraisal is completed, the customer will be charged what the appraiser charges for his services.

Credit Report – the cost of pulling the credit report.

Underwriting Fee – when loans are sold, investors charge the banks to do a post-closing underwriting of the file for audit reasons and charge them this fee that gets passed on to the buyer.

Tax Service Fee – a fee that investors charge to monitor the payment of property tax bills and insurance payments.

Flood Certification – banks get a certification from FEMA showing that the subject property is or is not deemed in a flood zone.

Documentation Prep Fee – a fee charged to help banks with the cost of copying and scanning all of the paperwork associated with the buyer’s loan file.

Settlement Closing Fee – charge title companies or attorneys charge to close the loan.

Title Examination – fee charged by title companies or attorneys to do a search of the title on the subject property to ensure that there is a clear title.

Lenders Coverage Insurance – insurance that is charged to cover the lender in case of any title problems during the duration of the loan.

Recording Fees – fee charged by title companies or attorney to record the deed of trust.

State Tax Stamps – tax that goes to the State or County on any new purchases or refinances of real property.

Investor – company that services mortgage loans.

Home Owners Insurance – insurance that covers the home and its contents from fire or disaster.  It is required that one year of premiums are to be paid upfront and put into an escrow account.  There is also a small cushion of reserves set aside to protect you from your monthly payment increasing due to higher premiums.

County & City Taxes – collection of annual city and county property taxes due on your home.  When the tax bill(s) are due, there will be enough money in the escrow account to pay annual property taxes.  The customer will not get a separate bill at the end of the year.