Tax Incentives & Closing Costs/Fees
Below is a list of typical closing costs, fees, and other real estate terms defined for easy reference as you move through the purchasing process.
- Loan origination fee: is paid to the lender to cover the costs of evaluating and processing your mortgage loan.
- Points: The amount a borrower might pay to “buy down” their mortgage interest rate. The fee is based on a percentage of the loan amount.
- Appraisal fee: The fee for having your new home appraised, which is required by the lender and often paid outside of closing.
- Credit report: covers the expense of pulling a credit history report and a credit score.
- Mortgage Insurance: insurance required for the borrower to pay upfront when less than 20% is put down on a home purchase.
- Interest payment: You may pay interest on your mortgage loan to cover the time between the closing date and the date your first mortgage payment period begins.
- It is important to note that interest on a mortgage is usually paid in arrears at the end of the time period it covers. For example: If a closing is on May 15, and your first monthly payment starts to accrue interest on June 1, an interest payment covering the period between May 15 and May 31 may be required at closing. Consider this timing when scheduling your closing. It is a fee you can reduce by closing near the mortgage due date.
- Good Faith Estimate (GFE): This is the document the lender is required to give a borrower at the very beginning of the process that estimates what the final fees on the whole will be.
- Escrow account fees: A trust account created by the mortgage company to hold the borrower’s money to pay the property taxes and insurance. To fund the account, your monthly mortgage payments may include one-twelfth of your annual payment for these items.
- Title search: pertains to the examination of public records to ensure that no one but the seller has a valid claim to the property.
- Title insurance: relates to insurance that protects the lender and buyer from losses that may result from disputes over the property’s title. Typically, the buyer purchases the Lender Title Insurance.
Other Third Party Fees
- Document preparation fee: charged by the title company for the preparation of the closing documents.
- Underwriting Fee: covers the costs of the underwriting process, which is the analysis of the risk involved in making a mortgage loan.
Your Atkinson Realty agent is there to help you digest all the technical terms of your transaction. The closing process is complex, so don’t risk not having adequate representation.