Fees
Fees
There are five main types of closing/settlement cost fees:
- Lender/Broker-Related: these cover the lender or broker’s administrative costs, and sometimes include additional fees to increase their profits on a loan (these are referred to in the business as “garbage” or “junk” fees, it’s good to ask your loan officer what each charge is for and see if you can negotiate)
- Third-Party: for services provided by other companies, such as your appraisal, title search, inspections, etc.
- Government: many state and local governments charge fees to transfer and record the sale of property
- Impound Account/Pre-paids: if your lender requires you to use an impound account, you may have to pre-pay between two and twelve months of your property taxes, hazard/homeowner’s insurance, and mortgage insurance into this account. Since these are recurring costs, they generally can’t be financed (added to your loan amount), and they can add up to a big amount due on the closing date.
- Pro-rations: few people move exactly on January 1, so usually the seller has already paid some portion of the taxes or Homeowner’s Association Dues that the buyer now owes. At closing, the pro-rated amount is calculated and the buyer reimburses the seller.
Fee Types
They are categorized into two types:
- Non-recurring: one-time fees for services rendered in the processing of your purchase; for example, appraisals, credit reports, inspections. Most of these can be financed as part of your loan. This raises the loan amount slightly, but keeps you from having to borrow money from your grandmother to cover closing.
- Recurring: charges that come around again and again, like property taxes and hazard/homeowner’s insurance. These are generally not able to be rolled into your loan and must be paid in cash.
Who Pays What?
Unfortunately, there are no standards. Traditions about who pays each fee vary from state to state and even county by county. And in some hot real estate markets, it may be negotiable as buyers look for ways to make their offer more attractive to the seller.
Ask your real estate agent for guidance on this during the interviewing process or soon thereafter, so you will be prepared.
This is a comprehensive list of fees which have shown up on settlement statements, no one pays all of these fees:
|
Amount Range : |
Paid to: |
|
|
Loan Origination Fee |
Generally 1% of loan amount |
Lender |
|
Lender or Broker Fee |
$1,500-$200 |
Lender/Broker |
|
Discount points |
|
Lender |
|
Application Fee |
$400-$100 |
Lender |
|
Administration Fee |
$1,000-$250 |
Lender |
|
Commitment/Rate Lock Fee |
$750-$300 |
Lender |
|
Document Preparation Fee |
$400-$25 |
Lender |
|
Underwriting Fee |
$500-$100 |
Lender |
|
Processing Fee |
$750-$50 |
Lender/Broker |
|
Lender’s Title Insurance |
.2%-.5% loan amt. |
Title Company |
|
Appraisal Review Fee |
$150-$75 |
Lender |
|
Tax Service Fee |
$250-$70 |
Lender |
|
Warehousing Fee |
$100-$50 |
Lender |
|
Funding Fee |
$450-$100 |
Lender |
|
Wire Transfer Fee |
$50-$10 |
Lender/Broker |
|
Courier Fee |
$100-$30 |
Lender |
|
|
|
|
|
|
|
|
|
$750-$200 |
Appraisal Company |
|
|
$500-$50 |
Licensed Inspector |
|
|
Pest/Termite Inspection & Report |
$100-$75 |
Pest Inspector |
|
Flood Certification |
$250-$25 |
Flood Certification Co. |
|
$1,000-$500 |
Warranty Company |
|
|
Settlement Fee/Attorney Fees |
$1,500-$50 |
Settlement Co., Attorney |
|
Lender’s Inspection (442 Inspection) |
$300-$100 |
Inspector |
|
TitleSearch, Report, Name Search |
$750-$100 |
Title Company |
|
.3%-.6% purchase price |
Title Company |
|
|
Notary Fees |
$100-$10 |
Notary |
|
Loan Tie-In Fees |
$100-$25 |
Escrow/Settlement Co. |
|
Escrow/Settlement Fee |
$100-$25 |
Escrow/Settlement Co. |
|
Sub-Escrow Fee |
$100-$25 |
Title Company |
|
$75-$8.50 |
Credit Agencies |
|
|
Survey |
$450-$50 |
Surveyor |
|
Postage/Courier |
$100-$25 |
Escrow/Settlement Co. |
|
Homeowner’s Assoc. Transfer Fee |
$100-$25 |
Homeowner’s Assoc. |
|
|
|
|
|
|
|
|
|
Recording Fee |
$250-$20 |
State/local govt. |
|
Transfer Tax |
$1,000-$25 |
State/local govt. |
|
City/county/state Tax Stamps |
$5,000-$50 |
State/local govt. |
|
Property Taxes |
Often % of sales price |
State/local govt. |
|
|
|
|
|
|
|
|
|
Pre-paid Mortgage Interest |
Depends on date of closing |
Lender |
|
Hazard/Homeowner’s Insurance |
Up to 1 year of premiums |
Lender, for impound account |
|
Property Taxes |
Up to 1 year of taxes |
Lender, for impound account |
|
Private Mortgage Insurance |
Up to 1 year of premiums |
Lender, for impound account |
|
VA Funding Fee (VA loans) |
2-3% loan amount |
VA |
|
Up Front Mortgage Insurance Premium (FHA loans) |
2.25% loan balance |
FHA |
No or Low Cost Loans: Lenders often offer a type of loan called a One Fee, or Low or No Cost Loan which rolls all of these fees up into one tidy package. Usually they cover the costs by giving you a slightly higher interest rate, but it can pay to check.
If you are interested in this, ask your mortgage broker or lender about a No Cost or Low Cost loan to see if you qualify.
Affordable Settlement Services Bundle: First American offers a package of discounted title insurance and related services for low-to-moderate-income families. Ask your First American title officer whether you qualify for this low cost option.