What Are All These Fees?
If you’re a first-time homebuyer, you might be surprised to discover all of the settlement costs—sometimes called closing costs—that you will have to pay to complete your transaction. You expected that buying a home would mean paying principal, home insurance, taxes, interest, and maybe mortgage insurance. But what are all these other fees you’re getting hit with on closing day? Don’t get caught off guard! Here’s an explanation of some of the fees you might pay to become a member of the property-owners’ club.
Credit Report Fee
Lenders use a credit report to determine how much of a risk it will be to lend money to you, and therefore, how much they should charge for you the loan.
Flood Certification Fee
It’s important to determine if your home is in an area prone to flooding.
Government Recording and Transfer Charges
The cost of legally filing the records of the deed and mortgage. Depending on your agreement, you or the seller may pay this cost.
Lender Inspection Fee
Your lender may also want to conduct an inspection, especially if the construction is new.
This is the lender’s fee for making the loan. Origination services include the processing, underwriting, and funding of the loan.
Pest Inspection Fee
Lenders frequently require a home inspection for termites or other pest infestations. You may want to get this even if it’s not required.
Settlement/Closing Agent Fee
The fee paid to whomever handles the closing, be it a settlement agent, closing agent, attorney, or title agent. This person handles legal documents, fee payments, real estate taxes, and other transactional details.
The survey is a drawing of the property that shows property lines, structures, and any encroachments. It may not always be required by the lender, but it’s still useful information to have. In some cases, you may be able to save money by getting an update of a previous survey.
Title Service and Insurance Fees
First, a lender must verify who actually owns the property and whether there are any liens on the property (claims from creditors that can impede the sale of the home). Then the title insurance company issues title insurance, promising legal protection and payment for court fees should any claims against the property arise. Note that a lender’s title insurance does not protect you—you’ll need owner’s title insurance for that.
Tax Service Fee
Borrowers pay this fee to lenders to cover the cost of a third party that handles the payment of property tax bills. This ensures tax payments are timely and prevents tax liens. For a personal explanation of what to expect during closing day and throughout the overall home buying process, contact a mortgage professional at First Bank today for a free consultation.
Adapted from the US Department of Housing and Urban Development’s settlement cost booklet, “Shopping for Your Home Loan”, updated 8/17/2010.