Closing Costs

Closing costs are fees usually paid by the borrower when a property is purchased or refinanced. However, closing costs can be paid in some cases, either fully or partially, by the seller, an assistance program, a gift, or simply rolled(included) in the mortgage loan.

Actually there are two types of closing costs. First, there are the fees associated with generating and approving the loan, receiving a title insurance policy for the property, physically closing the loan and recording the event with the county inwhich the property resides.  Second, there are what is called the "Prepaid" or "Escrow" items. These items are the funds necessary to start escrow accounts for your property taxes and hazard (home) insurance accounts; these accounts pay your taxes and insurance when they become due.  There is also interest due when the loan is closed.  This interest is figured on a daily basis from the date you close the loan until the last day of that month.  This enables the borrower to skip the first payment; e.g., if you closed your loan on April 15th, you would pay the interest on the loan from the 15th through the 30th of April, but your first payment would be due on June 1st, thereby skipping the May 1st payment.  Since these "Prepaid" or "Escrow" items are to be paid at the time of closing, they too are referred to as closing costs.

Included in the closing costs not considered "Prepaid or "Escrow" items are:

Loan Origination Fee
This is a fee charged by the lender for originating the loan. It includes such items as setting up the loan file, the verification of all information included in the file, processing all the documentation associated with the file, submission to underwriting function, creating documents for and arranging the closing of the loan.

Appraisal Fee and Credit Report Charges
The appraisal fee is the fee to have a licensed appraiser verify the value of the property.  The credit report charges are the costs associated with obtaining your credit report and any other third-party charges associated with your credit.

Title Search and Title Insurance
A title search is a check of the title records to make sure the seller is the actual legal owner of the property, and that there are no liens or other claims outstanding.  Title insurance policies typically insure a homebuyer against any title search errors or mistakes, and against loss due to disputes over property ownership. The cost of title insurance is usually a set value per thousand of dollars of the total loan amount.

Discount Points
Discount points are usually voluntary and permanently reduce the interest rate of the loan, thereby reducing monthly payments. They are interest charges paid up-front when a borrower closes a loan. A point is equal to 1 percent of the loan amount (e.g. 1.5 points on a $100,000 mortgage would cost the borrower $1,500, and maybe it would reduce the interest rate by, say a 1/4%).

Miscellaneous Fees
Such miscellaneous fees can include a closing fee charged by the title company, an overnight mail fee, a flood certification fee, a tax service fee (to set up your property tax account and to automatically pay the taxes each year for the life of the loan), an underwriting fee, and governmental recording(recording the note and deed of trust with the county) and transfer fees.

Good Faith Estimate
Three days after you make application for your mortgage loan, you will receive a "Good Faith Estimate" (it's the law).  This is a form that itemizes each cost and "estimates" what your total closing costs will be; however, these costs can change at closing.  At Command Home Mortgage, Inc., they don't change; we guarantee our closing costs; if we make a mistake, we pay, not you.