Buyers Guide To Closing Costs

A. Origination Charges:

• Origination Fee:  Payment to lender to evaluate your credit and underwrite and process loan.
• Discount Points:  Paid to lender at closing to reduce interest rate over life of mortgage
• PMI or Mortgage Insurance:  Required if down payment is less than 20%.  Protects lender if you default.

B. Services You Cannot Shop For:

• Appraisal Fee:  Paid to appraiser to confirm home's fair market value
• Flood Certification Fee:  Covers cost to determine if home is in federally designated flood zone.  If it is, lender will require you to purchase flood insurance.  Some lenders also charge a separate flood monitoring fee to check for flood map updates.

C. Services You Can Shop For:

• Title Search:  Covers cost to confirm seller owns property, and it is free from liens
• Title Insurance:  Protects lender and (optionally: Section H) you if title claim surfaces later
• Survey Fee:  Charge to verify property boundaries
• Termite Inspection Fee:  Inspection required to certify home is free of termite damage

E. Taxes and Other Government Fees:

• Recording Fee:  Paid to state to record transfer of property from one owner to another
• Transfer Tax:  Paid to state based on the amount of the mortgage

F. Prepaids:

• Prepaid Interest:  Covers mortgage interest due between date of closing and first mortgage payment
• Prorated Property Tax:  Covers property taxes from date of closing to end of tax year
• Homeowners' Insurance:  Typically, you'll pay full first-year cost upfront at closing
• Homeowners' Association Transfer Fee:  Paid on properties governed by associations to transfer ownership documents to you

G. Initial Escrow Payment at Closing:

• Initial Escrow:  Lender may require first 2 months of next year's homeowners' insurance, flood insurance and property taxes to build up reserve