I recommend that you carefully compare
closing costs between lenders before selecting a loan. This
task is complicated by the fact that different lenders and
brokers use different names for the same item. All lenders and
brokers are required to provide you with a Good Faith
Estimate detailing the services you may be required to get
and pay for in connection with your loan.
This Good Faith Estimate will give you a way to compare
loans and see what your closing costs would be. Below you will
find a list of coded names that describe the different fees,
which may be associated with the services previously
mentioned. These codes and names correspond to those found on
the HUD-1 Settlement Statement.
Lender Fees
801 - Loan Origination Fee
A fee to cover the lender�s costs for obtaining
financing and administrative costs, most often expressed
as a percentage of the loan amount (1% = 1 point). Can be
a flat fee and/or paid by sellers and third parties.
802 - Loan Discount Fee Discount Points
Often called "points", is a one-time charge to
you from lender to lower the interest rate on your loan.
Generally, the more points you pay, the lower your rate.
Each point is 1% of the loan amount. For example, if you
have a loan amount of $100,000, one point would cost you
$1000. Sometimes you will see offers with negative points.
Negative points refer to money paid to you that can be
used to offset your other closing costs. You will usually
see a higher interest rate with negative points.
803 - Appraisal Fee
The appraisal fee covers the cost of evaluating your home
to estimate the fair market value. The appraised value of
your home is used to calculate LTV. See LTV for more
information.
804 - Credit Report Fee
This fee covers the cost of obtaining a credit report,
which shows how you have handled other credit
transactions. The lender uses this report in conjunction
with information you submitted with your Q-form regarding
your income, outstanding bills, and income to determine
whether you are an acceptable credit risk, how much the
lender can loan you and at what interest rate.
805 - Lender Inspection Fee
This covers inspections by the lender or outside inspector
of your house/property. Most often associated with new
construction.
806 - Mortgage Insurance Application Fee
You may be charged this fee to process an application for
Mortgage Insurance (MI) if needed.
807 - Assumption Fee
The assumption fee is a charge to you, if you take over
the existing mortgage on the house you are purchasing. For
example, if you are buying an existing house from someone
you may have the option to take over the mortgage that the
seller is paying.
808 - Mortgage Broker Fee
If you use a broker to get a loan, any fees charged by the
broker are listed here.
809 - Underwriting Fee
A cost to cover the final analysis and approval of the
mortgage; often the lender's cost to the investor who will
subsequently purchase the loan.
810 - Tax Service Fee
A fee paid to set up a service which identifies the
payment due date of local taxes for the servicer of the
loan.
813 - Processing Fee
A fee charged by the lender to cover costs associated with
the processing and closing of a mortgage loan.
814 - Application Fee
A fee to reimburse the lender for internal costs
associated with initiating the application process.
822 - Flood Certification Fee
Since your house is collateral for your loan, the lender
wants to be sure the property is not in a flood zone. This
fee covers obtaining a report from the Federal Emergency
Management Agency (FEMA) that indicates whether or not
your property is in a flood zone. If your home is located
in a flood zone, you will need to get flood insurance.
Most homeowner insurance policies do not cover flood
damage. This only covers the report and not the insurance
if needed.
Lender Pre-paid Items
901 - Interest
Lenders require you to pay the interest due on your
mortgage from the close date to the first day of the
following month. The interest due is calculated using the
loan's interest rate, the loan amount and the number of
days until your first payment. For example, if you close
on the 11th of March, you will pay 21 days interest
(3/11-3/31) assuming your first payment is May 1st.
Mortgage interest is always collected in arrears therefore
you will pay the April interest in the May payment using
the example above.
902 - Mortgage Insurance
Premium Lenders usually require Private mortgage insurance
(PMI) when your LTV (loan amount divided by property
value) is greater than 80%. The insurance protects the
lender in case of loan default.
903 - Hazard Insurance
Premium Since the property is collateral for the loan, you
will be required to insure your house. At closing, you
must pay the first year's premium or prove that you
already have coverage (if refinancing). If you are
purchasing a condominium, your association policy will
already cover your unit and you will not need to make this
payment. Homeowner's insurance covers you against damage
from fire, wind, and other natural hazards. Flood damage
is usually not covered by a Homeowner's Insurance Policy.
Escrow Account Deposits
An escrow account is an account used when the lender will
be paying your homeowner�s insurance and property taxes on
your behalf. You prepay the amounts and the lender pays the
costs as they come due. You will probably have to pay an
initial amount to start the reserve account.
1001 - Hazard Insurance
This fee represents the amount the lender withholds to
ensure you pay your homeowner's insurance on time.
Typically, the lender will require you to pay two months
of premiums at closing, and then the remaining payments
are included in your monthly payments.
1002 - Mortgage Insurance
If you need private mortgage insurance (PMI), you may be
required to prepay those premiums. Remember to reference
canceling mortgage insurance to see when you can stop
paying it.
1003 - City Property Tax
If your property is in a jurisdiction where city taxes
apply, you will be required to pay a portion of the taxes
at closing.
1004 - County Property Tax
The amount of property tax you owe can vary dramatically
by county and the date you purchase your home.
Title Charges
1101 - Settlement or Closing Fee
This fee pays for the services of the escrow holder or
settlement service that handles all the financial
transfers and payments associated with the closing
process. The title company sets these fees.
1102-1104 - Title Fee
Title fees may include title search, title examination and
title insurance.
1105 - Document Abstract Preparation Fee
Lenders or title companies may charge a fee to cover the
costs of preparing the final legal documents required for
closing.
1106 - Notary Fee
This fee covers the cost of a person licensed as a notary
public to swear to the fact that the individuals named in
the documents are the actual persons that signed them.
1107 - Attorney Fee
You may be charged a fee to pay for legal services of a
settlement service provider at closing. The lawyer will
usually oversee the signing of the documents.
1108 - Title Insurance
The total cost of your and lender's title insurance.
1109 - Title Insurance Lender's Coverage
Protects the lender against loss due to problems or
defects in connection with the title. The face amount of
coverage is usually written for the amount of the mortgage
loan and covers losses due to defects for problems not
identified by title search and examination.
1110 - Owner's Title Insurance
This fee covers the part of the title insurance policy
that protects the owner against loss due to disputes over
ownership of the property. The owner's policy is not
necessary for a refinance transaction as the existing
policy remains in full force and effect, if obtained when
you purchased your house, for as long as the owner owns
the property.
1112 - Carrier Fee
A fee paid to an overnight delivery service for delivery
of mortgage documentation.
Government Fees
1201 - Recording Fee
After you close, your mortgage is recorded at the county
office to make record of your mortgage.
1202 - City/County Tax/ Stamps
You may be charged tax on your mortgage by the state the
property resides in.
1203 - State Tax/ Stamps
You may also be charged tax on your mortgage by the state
the property resides in.
Additional Settlement Charges
1301 - Survey Fee
Your lender may require a surveyor to conduct a survey of
your property. A survey determines the exact location of
the home and the lot line, as well as, easements and
rights of way. This also protects you to ensure you have
record of your property boundaries and size.
1302 - Pest Inspection Fee
This fee covers the cost of inspections for termites and
other pest infestation.
1303 -1305 - Lead-Based Paint Inspection Fee
Houses built prior to 1978 may be required to have an
inspection for lead-based paint hazards.
