Closing Costs Checklist

By Matt Unangst, 23 Jan 00:42

Closing costs, also known as settlement costs, are not included in the price of the property you buy. They are paid separately when the transaction closes and go to cover a number of services involved in selling the property. It is sometimes possible to reduce closing costs by purchasing special package deals from title companies where you buy multiple services.

Closing costs less if you are paying cash for the property. Costs associated with taking a mortgage can be up to seven percent of the total price of the property.

Here is a list of services covered by closing costs:

• Broker’s commission (if you are using a broker) – usually 6% of sales price

A number of fees associated with your mortgage (if you have one):
• Loan origination fee – normally 1% of total mortgage
• Underwriting fee – an underwriter is the last person to review your loan before it can be approved

This next set of fees is usually paid before closing:
• Loan discount – also known as “points,” this is a one-time fee that you pay to your lender in order to lower the monthly interest rate on the mortgage
• Appraisal fee – covers an appraisal of your property by a state-licensed appraiser (required by most lenders)
• Credit report fee – a lender will want to be certain you have good credit
• Lender’s inspection fee – most lenders require that a property be inspected before they will approve a loan
• Mortgage insurance application fee – insurance for the lender in case of a default on the mortgage
• Mortgage premium – one-time fee
• The first month’s interest on the mortgage
• Homeowner’s (aka Hazard) insurance premium

A number of fees can be deposited with the lender on reserve:
• This year’s homeowner’s insurance premium
• Mortgage insurance for a variable number of months
• City and county property taxes – normally for the next two months
• Annual assessments for any local taxes

Fees related to the title to your property:
• Closing fee for whoever closes your transaction (i.e. escrow agent)
• Abstract of title search, a report detailing the history of your property’s title
• Title examination – a search of title records that often goes back over a century to make sure that there are no possible hindrances to your title to the property
• Title insurance binder – paid to title company to insure you will buy insurance from them
• Document preparation fee – this fee varies, ask for information on exactly what you are paying for, especially any “courier” fees
• Notary fees – a notary must witness the signing of the final closing papers
• Attorney fees (if you have used an attorney to deal with any title issues
• Title insurance coverage- both owner’s coverage to protect your title and lender’s coverage to protect your lender’s collateral

Fees paid to the government:
• Recording fees for the deed, mortgage, and any releases
• City, county, or state tax stamps for the deed and mortgage – not all states require these stamps

Other fees that don’t fit into the categories above:
• Survey fee – pays for measuring the boundaries of the property
• Pest inspection fee – most lenders require a pest inspection before approving a loan
• Flood certification, earthquake insurance, radon tests, lead paint inspections, etc. – fees specific to your property based on its location and history

SEE ALSO: Closing Costs, The Closing Process, The Functions of Escrow, 10 Steps to a Hassle-Free Close

Tags: closing costs settlement costs escrow closing